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'7// INTERNATIONAL MONETARY FUND SUPPLEMENTAL

a .2, HEARINGS, TREASURY-POST OFFICE DEPARTMENTS

AND EXECUTIVE OFFICE APPROPRIATIONS FOR 1966

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HEARINGS

BEFORE THE

COMMITTEE ON APPROPRIATIONS

UNITED STATES SENATE

EIGHTY-NINTH CONGRESS

FIRST SESSION

ON

H.R. 7060

MAKING APPROPRIATIONS FOR THE TREASURY AND POST

OFFICE DEPARTMENTS, THE EXECUTIVE OFFICE OF THE

PRESIDENT, AND CERTAIN INDEPENDENT AGENCIES FOR

HE FISCAL YEAR ENDING JUNE 30, 1966, AND FOR OTHER

PURPOSES

Printed for the use of the Committee on Appropriations

INTERNATIONAL MONETARY FUND SUPPLEMENTAL

HEARINGS, TREASURY- POST OFFICE DEPARTMENTS

AND EXECUTIVE OFFICE APPROPRIATIONS FOR 1966

HEARINGS

BEFORE THE

COMMITTEE ON APPROPRIATIONS

UNITED STATES SENATE

EIGHTY-NINTH CONGRESS

FIRST SESSION

ON

H.R. 7060

MAKING APPROPRIATIONS FOR THE TREASURY AND POST

OFFICE DEPARTMENTS, THE EXECUTIVE OFFICE OF THE

PRESIDENT, AND CERTAIN INDEPENDENT AGENCIES FOR

THE FISCAL YEAR ENDING JUNE 30, 1966, AND FOR OTHER

PURPOSES

Printed for the use of the Committee on Appropriations

U.S. GOVERNMENT PRINTING OFFICE

48-740 WASHINGTON : 1965

A
COMMITTEE ON APPROPRIATIONS

CARL HAYDEN, Arizona, Chairman

RICHARD B. RUSSELL, Georgia

ALLEN J. ELLENDER, Louisiana

LISTER HILL, Alabama

JOHN L. McCLELLAN, Arkansas

A. WILLIS ROBERTSON, Virginia

WARREN G. MAGNUSON, Washington

SPESSARD L. HOLLAND, Florida

JOHN STENNIS, Mississippi

JOHN 0. PASTORE, Rhode Island

A. S. MIKE MONRONEY, Oklahoma

ALAN BIBLE, Nevada

ROBERT C. BYRD, West Virginia

GALE W. McGEE, Wyoming

MIKE MANSFIELD, Montana

E. L. BARTLETT, Alaska

WILLIAM PROXMIRE, Wisconsin

RALPH YARBOROUGH, Texas

LEVERETT SALTONSTALL, Massachusetts

MILTON R. YOUNG, North Dakota

KARL E. MUNDT, South Dakota

MARGARET CHASE SMITH, Maine

THOMAS H. KUCHEL, California

ROMAN L. HRUSKA, Nebraska

GORDON ALLOTT, Colorado

NORRIS COTTON, New Hampshire

CLIFFORD P. CASE, New Jersey

EVERABD H. SMITH, Clerk
INTERNATIONAL MONETARY FUND SUPPLEMENTAL

HEARINGS FOR TREASURY, POST OFFICE, AND EXECUTIVE OFFICE APPROPRIATION BILL FOR 1966

THURSDAY, JUNE 3, 1965

U.S. SENATE,

COMIVIIME ON APPROPRIATIONS,

T V a8hing ton, D.C.

The committee met at 10 a.m., pursuant to call, in room 1223, New

Senate Office Building, Hon. Carl Hayden (chairman) presiding.

Present: Chairman Hayden and Senators Ellender, Robertson, Holland, Byrd, Bartlett, Saltonstall, and Allott.

INTERNATIONAL MONETARY FUND

STATEMENT OF FREDERICK L. DEMING, UNDER SECRETARY FOR

MONETARY AFFAIRS, DEPARTMENT OF THE TREASURY; ACCOMPANIED BY WILLIAM B. DALE, U.S. EXECUTIVE DIRECTOR,

INTERNATIONAL MONETARY FUND

U.S. QUOTA INCREASE

Chairman HAYDEN. The committee will come to order.

This morning the committee will hear first from the Under Secretary of the Treasury for Monetary Affairs on a proposed supplemental

appropriation for the fiscal year 1965, in the amount of $1,035 million

in order to increase the -U.S. quota to the International Monetary Fund.

This is contained in Senate Document 31.

(The document referred to follows:)

[S. Doc. No. 31, 89th Cong., 1st sess.]

COMMUNICATION FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING A

PROPOSED SUPPLEMENTAL APPROPRIATION FOR THE FISCAL YEAR 1965, IN THE

AMOUNT OF $1,035,000,000, IN ORDER To INCREASE THE UNITED STATES QUOTA TO

THE INTERNATIONAL MONETARY FUND

THE WHITE HOUSE,

Washington, June 1, 1965.

The PRESIDENT OF THE SENATE.

SIR: I have the honor to transmit herewith for the consideration of the Congress a proposed supplemental appropriation for the fiscal year 1965 in the amount

of $1,035,000,000 in order to increase the U.S. quota to the International Monetary Fund.

The details of this proposed appropriation, the necessity therefor, and the

reasons for its submission at this time are set forth in the attached letter from

the Director of the Bureau of the Budget, with whose comments and observations thereon I concur.

Respectfully yours,

LYNDON B. JOHNSON.

1
2 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET,

Washington, D.C., May 27, 1965.

THE PRESIDENT,

The White House.

SIR: I have the honor to submit herewith for your consideration a proposed

supplemental appropriation for the fiscal year 1965 in the amount of $1,035,000,000

in order to increase the U.S. quota in the International Monetary Fund, as

follows:

FUNDS APPROPRIATED TO THE PRESIDENT

Increase in Quota, International Mon,etary Fund

To finance an increase in the quota of the United States in the

International Monetary Fund, $1,035,000,000 to be available from

June —, 1965, and to remain available until expended.

To assure continued ability of the International Monetary Fund to provide

needed international credit, the member nations voted to increase by 25 percent

the quotas of all members. The increase in the U.S. quota has just been authorized by the Congress in H.R. 6497, now awaiting Presidential approval. Appropriation of the authorized quota increase as promptly as possible is highly desirable to provide early strengthening of the Fund and to encourage similar prompt

action on the part of other members.

The amount requested herein, when added to the amounts previously requested,

will not increase the total for the fiscal year 1965 as shown in the 1966 budget.

I recommend that the foregoing supplemental appropriation be transmitted to

the Congress.

Respectfully yours.

KERMIT GORDON,

Director of the Bureau of the Budget.

Chairman HAYDEN. You may proceed, Mr. Deming.

You may proceed, Mr. Deming.

Mr. DEMING. Mr. Chairman and committee members, I am glad to

appear before the committee today in support of an appropriation to

enable the United States, in cooperation with the other members of the

International Monetary Fund, to take part in a broad international

program for expanding the resources of the Fund by 25 percent plus

larger increases for 16 countries.

I have with me today Mr. William B. Dale, U.S. Executive Director

of the Fund, who will be able to answer any questions of detail you

may have on the Fund's operations.

AUTHORIZATION LEGISLATION ENACTMENT

Legislation amending the Bretton Woods Agreements Act of 1945

to authorize a 25-percent increase, amounting to $1.035 million, in the

quota of the United States in the Fund was passed by the Senate by

unanimous consent and in the House by a vote of 301 to 88. Public

Law 89-31, which also authorizes the appropriation of the U.S. quota

increase, was signed yesterday by the President.

As President Johnson pointed out in submitting this legislation to

the Congress, the International Monetary Fund has played a key role

in the flourishing economic growth experienced by the free world in

the last two decades, and an expansion of the Fund's resources is now

needed if it is to continue to contribute effectively to free world growth

in the future.
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 3

ENVISIONING OF NEED FOR INCREASE BY FUND FRAMERS

The framers of the International Monetary Fund foresaw the probable need for periodic increases in Fund quotas to keep pace with the

expansion in world economic activity. While the Articles of Agreement permit review of the adequacy of quotas at any time, they provide

that quotas must be reviewed every 5 years.

The present proposals for enlarging quotas result from the fourth

quinquennial review. While individual quotas have been changed from

time to time on the request of particular members and approval by the

Governors of the Fund, the only previous general Increase occurred

in the period 1958-59. At that time, there was a general increase in

quotas of 50 percent for all members and special quota increases were

requested and accepted by Germany, Canada, Japan and certain other

countries.

INCREASED WORLD TRADE

Since 1958, world trade has increased by more than 50 percent. Aggregate world imports, for example, were about $101 billion in 1958

and about $156 billion in 1964. No comparable single figure is available to measure world capital movements, but these have undoubtedly

increased by a substantially greater percentage since the restoration of

de facto convertibility in Western Europe at the end of 1958. Both

short-term and long-term capital movements have increased greatly.

Some of these are equilibrating in nature. Others tend to widen rather

than narrow balance-of-payments disequilibria.

GREATER USE OF FUND RESOURCES BY LARGER MEMBER COUNTRIES

The same period has seen greater use of the Fund's resources by the

larger member countries. Canada, Italy, Japan, the United Kingdom

and the United States have either drawn on Fund resources or entered

into standby arrangements with the Fund, or both.

In the most recent 10-year period, net drawings outstanding at the

end of the year have varied from a low of $234 million in 1955 to a

high of $2,621 million at the end of 1964. The latter figure is

unusually high because it includes nearly $1 billion of net drawings by

the United Kingdom, reflecting a large drawing by that country in

December 1964. The United Kingdom has also drawn $1.4 billion in

May of this year.

DECLINE OF MAJOR CURRENCY HOLDINGS OTHER THAN DOLLARS AND STERLING

As a result of the increased use of the Fund, its holdings of major

currencies other than dollars and sterling have declined by about $1.6

billion since 1959 and now amount to about $1.5 billion.

These facts clearly indicate the need for an increase in the Fund's

resources at this time. This need was unanimously recognized by the

Governors of the Fund at their meeting in Toyko last September.

BOARD OF GOVERNORS RESOLUTIONS PROPOSING INCREASED MEMBER QUOTAS

Acting on instructions from the Board of Governors, the Executive

Directors submitted to the Governors two resolutions: the first pro-

•
4 S UPPLEMEN TAL HEARINGS TREASURY AND POST OFFICE, 1966

poses that all member countries accept a 25-percent increase in quota;

the second proposes that 16 of the members accept, in addition to the

25-percent increase, special increases which in the aggregate amount

to S870 million.

On April 1, 1965, the Fund announced that these resolutions were

adopted by the required 80 percent of the total voting power of the

Board of Governors. Former Secretary of the Treasury Dillon, in

accordance with the directive of the National Advisory Council, cast

the vote of the United States in favor of the two resolutions.

U.S. QUOTA

The combined total of general and special increases recommended

amounts to nearly $5 billion, and acceptance of the recommendation by

all members would increase the total of Fund quotas from a little

more than $16 billion to approximately $21 billion. The U.S. share

of this total increase would be slightly over one-fifth, and our quota

would become $5,160 million, as compared to its present $4,125 million.

If all members countries accept the quota increases suggested for

them, Fund holdings of the currencies presently used extensively in

drawings will be increased by more than $1 billion and the liquidity

of the Fund will be substantially improved. In addition, Fund holdings of gold will also be increased by approximately $1 billion.

REQUIREMENT FOR PERCENTAGE OF INCREASES TO BE PAID IN GOLD

Senator SALTONSTALL. May I interrupt you there? Why will the

Fund holdings of gold automatically be increased by approximately

$1 billion?

Mr. DEMING. Because 25 percent of the increases have to be paid in

gold.

Senator ELLENDER. How much of the special accounts are included

in the $1,035 million?

Mr. DEMING. In the special accounts?

Senator ELLENDER. You said there was a special increase.

Mr. DEMING. Of the $870 million, none of that. Those special increases are for 16 countries that do not include the United States.

TOTAL INCREASES OF OTHER COUNTRIES

Senator ELLENDER. To what extent are the other countries contributing?

Mr. DEMING. Approximately $4 billion.

The total increases are about $5 billion. The United States is about

q billion, so the other countries will be increasing their quotas about a

little less than $4 billion.

ASSERTION THAT FUND IS NOT TANTAMOUNT TO FOREIGN AID CHALLENGED

Senator ELLENDER. Would you consider that part of their foreign

aid program?

Mr. DEMING. No, sir.

Senator ELLENDER. Why not?

I.
4

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 5

Mr. DEMING. Because this is not a foreign aid program. This is one

of the distinctions I want to draw.

Senator ELLENDER. I wish you would, because in my judgment this

is foreign aid. We are here being asked to increase our ante to assist

underdeveloped countries and some we have assisted already.

Mr. DEMING. Senator, the International Monetary Fund is an international body whose primary purpose is the extension of relatively

short-term credits. It gives short- to intermediate-term credit to countries who are experiencing temporary balance-of-payments difficulties.

It is not an aid program.

Senator ELLENDER. What would happen if we did not do it? Suppose we did not have this Fund. What would happen?

Mr. DEMING. If we did not have the Fund at all?

Senator ELLENDER. Yes.

Mr. DEMING. Then we would have to find other ways to attempt to

finance adjustments to payments imbalances.

Senator ELLENDER. That would be foreign aid, wouldn't it?

Mr. DEMING. No, sir.

Senator ELLENDER. It would be contributions we would have to make

to increase the capability of our friends, to enhance their economic stability, wouldn't it?

Mr. DEMING. No, sir.

Senator ELLENDER. I won't argue then. Go ahead.

UNITED STATES USE OF FUND TO RETAIN GOLD

Senator SALTONSTALL. May I say, I have great respect for my colleague from Louisiana, but isn't it true this Fund helped us to keep

our gold from going abroad recently when we were very low on our

balances? It is my understanding that we procured dollar balances

from England and Germany—France was drawing it back—to protect our gold from going abroad.

Mr. DEMING. That is generally right, the Fund has helped us to

avoid gold losses.

Senator SALTONSTALL. So that was not a question of foreign aid,

but a question of international monetary exigency.

Mr. DEMING. I would rather phrase it in terms of international

monetary cooperation, and the financing of imbalances which go both

ways: that is, the financing of either surpluses or deficits.

U.S. DRAWINGS

Senator SALTONSTALL. How many times have we drawn on the

Fund?

Mr. DEMING. Five times. Our net drawing on the Fund at the

present time is about $120 million, and our peak was $350 million

gross amount.

Senator SALTONSTALL. The whole purpose of the International

Monetary Fund is to assist the various countries whose currencies are

not in balance so no country suffers. What do you call it— out of

balances? Isn't that the whole purpose?
6 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1 9 6 6

Mr. DEMING. The purpose is to permit orderly adjustment of imbalances in international payments.

Senator SALTONSTALL. The increase is because of increased trade

and the necessity of having more funds in the International Monetary

Fund so that it can be moved both ways.

Mr. DEMING. That is right. Drawings of dollars by other countries

have had the effect of repaying part of the U.S. drawings. This is

why our net drawings amount to $120 million. All countries must repay their drawings from the Fund either directly or through drawings

of their currency by other members. There are various countries at

any given point in time that have in a sense borrowed from the Fund

by using their currencies to purchase other currencies. The International Monetary Fund has experienced no losses whatsoever on

the credits they have extended in the course of its history.

Now any given country, at any given point in time, may be a net

purchaser of other countries' currencies from the Fund through the

use of its own currency. But these loans are made for—these extension of credit are made for a definite period of time-3 to 5 years.

To the best of my knowledge, they are current and have been repaid.

CUBA ONLY DEFAULT

Mr. DALE. We have had only one temporary default, only one.

Senator ELLENDER. How much was that?

Mr. DALE. That was in an amount of $25 million which Cuba had

outstanding, which was drawn a short time before the change in government in Cuba. Then Cuba voluntarily withdrew from membership April 2, 1964, and made a proposal for repayment of the outstanding amount to the Fund.

That proposal was accepted, and it is being honored in terms of

payments by Cuba.

FUND METHOD OF OPERA.TION

Senator ELLENDER. To what extent has the Fund been increased

since its inception?

Mr. DEMING. I do not have the figure.

Senator ELLENDER. Put that in the record for us. I would like to

also know if those currencies have depreciated.

(The information referred to follows:)

Total, Intelinational Monetary Fund quotas during various years

1945 7,154 1959 13,958

1953 8,738 April 1965 15,993

1958 9,193

The increase in quotas from 1958 through 1959 was due to a general increase

of 50 percent plus special increases for other countries. Increases in quotas in

other years are due to two factors: (1) expansion of membership in the

Fund and (2) individual increases in quotas requested by members.

18-740-65 2
STJPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 7

MAINTENANCE GOLD VALUE GUARANTEE

Mr. DEMING. There is a maintenance of gold value guarantee of the

currencies that go in the Fund. If they drop, more has to be put

in. Thus, there has not been any depreciation in the value of the

Fund assets.

Senator ELLENDER. Suppose the Fund were dissolved overnight.

How much of the money we put in would we get back?

Mr. DEMING. All of it.

Senator ELLENDER. Would you be able to pay everybody?

Mr. DEMING. Yes, but the liquidation payments would have to take

account of countries debts to the Fund. For example, the British

have just drawn on $1,400 million from the Fund, which means they

have put in sterling to the amount of $1,400 million,-and have taken

out various other currencies equivalent to this. There is a liability

on the part of the British to pay this back in a course of time.

Senator ELLENDER. In what period of time must the British repay

what was recently withdrawn?

Mr. DEMING. Three to five years.

MAINTENANCE OF ENGLISH STERLING STABILITY THROUGH FUND USAGE

Senator SALTONSTALL. Isn't it true, Mr. Deming, that this Fund,

and the use of it by the English, saved the English pound from a

crisis and that the whole value of keeping the English pound where

it is today is to make it possible for our dollars to stay where they

are today?

If the English pound goes, we go too. Now, a question concerning

what the Senator from Louisiana said: Isn't it also true, from what

Mr. William McChesney Martin said. the other night, that the

amount of currency in the United States and demands for an increased amount of currency, has been great recently with the increased prosperity of our country, so that there are now more dollars

in circulation today than when this Fund was created.

If there are more dollars in circulation, there are more dollars

going abroad, and what this Fund tries to do is to keep us from

sacrificing our gold balances. What we have asked Germany and

England to do is put up dollars to help us to keep from having our

gold going abroad when we are in a crisis. Is that not correct?

Mr. DEMING. Yes, sir; the Fund has assisted us in avoiding gold

losses.

Senator SALTONSTALL. And that is the purpose of the Fund?

FUND PURPOSE To Am BALANCE-OF-PAYMENTS IMBALANCES

Mr. DEMING. The purpose of the Fund is to permit countries that

have temporary imbalances in the balance of payment to make orderly adjustments.

4.
8 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

Senator SALTONSTALL. Germany has enormous overbalances. She

has more dollars than she knows what to do with, and she could help

us from keeping our gold from going abroad into France. Isn't that

correct?

Mr. DEMING. That is correct.

Senator ELLENDER. But our gold reserves have been going down

and down and down from $22.5 billion just a few years ago to now it is

$14 billion plus.

Senator SALTONSTALL. But that is due to other causes.

Senator ELLENDER. Why don't we stop it with the Fund, if that is its

purpose?

Senator SALTONSTALL. I wish we could.

Senator ELLENDER. I wish SO too.

Mr. DEMING. I cover some of that, Senator, later in my statement.

The proposed quota increases by country are shown in detail in the

Special Report of the National Advisory Council on International

Monetary and Financial Problems. Attached to that report as an

appendix is the report of the Executive Directors of the Fund to the

Board of Governors entitled "Increases in Quotas of Fund Members:

Fourth Quinquennial Review."

MEMBER CONSENT TO QUOTAS AND OTHER REQUIREMENTS

Now that the Board of Governors has adopted the resolutions submitted by the Executive Directors, two further requirements have to be

met. Each member must consent to the increase in its own quota.

Moreover, before any of the quota increases may become effective,

countries whose quotas on February 26, 1965, aggregated two-thirds

of the total fund quotas must consent to the increase in their quotas

and make payment to the Fund.

Payments received by the Fund will be placed in a segregated account until the two-thirds total is reached. Consents to the increase

must be given before September 25, 1965, unless the Executive Directors extend the time for action.

Public Law 89-31, the authorizing legislation, provides for the appropriation of $1,035 million to remain available until expended. Except for the gold portion of the increased subscription, I have every

reason to believe as I shall presently explain that, like our participation in the general arrangements to borrow, no calls for actual expenditures will be made for the foreseeable future.

REQUIREMENT FOR GOLD PERCENTAGE To BE PAID AT TIME OF QUOTA ACCEPTANCE

The articles of agreement of the Fund provide that 25 percent of any

quota increase must normally be paid to the Fund in gold 25 percent

of the proposed U.S. increase of $1,035 million amounts to $258.75 million and this amount must be paid at the time the United States accepts the quota increase.
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 9

AUTOMATIC GOLD DRAWING RIGHT ON FUND

In exchange for this payment, the United States will receive a "gold

tranche" drawing right on the Fund. This is a virtually automatic

drawing right and represents a reserve asset which the United States

can call upon at any time. Thus this payment will not result in any

change in our international reserve position and consequently will have

no effect on our balance of payments.

Senator ELLENDER. Will the support be in that amount until we get

it back?

Mr. DEMING. We exchange one form of assets for another.

Senator ELLENDER. What becomes of that $258 million? Doesn't

it leave Fort Knox and go somewhere else?

Mr. DEMING. It actually moves from one box in the Federal Reserve

Bank of New York to another box in that bank. And we obtain in

return virtually automatic drawing rights on the Fund, which is another form of reserve asset.

TREASURY GOLD STOCK REDUCTION OFFSET BY GOLD DRAWING RIGHT

Senator ELLENDER. But it does affect our gold balances.

Mr. DEMING. This will reduce our Treasury gold stock by this

amount, and it will be offset by a gold tranche drawing right.

Senator ELLENDER. But in the meantime our gold reserve would be

reduced by that amount.

Mr. DEMING. By this amount, surely.

LETTER OF CREDIT ISSUED FOR BALANCE OF PAYMENT

The remaining portion of the appropriation—$776.25

permit the United States to issue to the International Monetary Fund

a letter of credit in that amount on which the Fund may draw at such

time as it may require additional dollar funds to meet drawings of

other members. Drawings against this $776 million portion are not

likely to occur in the foreseeable future.

Senator SALTONSTALL. Until these other countries put up?

Mr. DEMING. That is right, and would not occur at that time since

the supply of dollars in the Fund is already a substantial amount.

This is a liability of the United States, but one that is unlikely to be

called on for any foreseeable future.

Senator SALTONSTALL. You have this gold tranche that has to be replaced in due course. If you draw on this gold tranche, this has to be

replaced?

Mr. DEMING. Yes. If we would draw on it, we would have to pay

it back.

Senator SALTONSTALL. In gold?

Mr. DEMING. The gold tranche is just a name for it. We would be

drawing in other countries' currencies and would be paying in other

countries' currencies. If we could not repay in other countries' currencies, we would repay in gold.

•••
10 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

EXPERIENCE RE U.S. PARTICIPATION IN GENERAL ARRANGEMENTS To BORROW (GAB)

It is interesting to note that this committee considered and approved

the appropriation of $2 billion for U.S. participation in the general

arrangements to borrow (GAB) . At the hearings on the appropriation former Secretary Dillon assured this committee that "in practice

we do not expect to have to use this authority in the foreseeable future."

Although the GAB has proved to be extremely useful and appropriation of the whole $2 billion was essential to U.S. participation, in

fact, no expenditures have been made pursuant to this appropriation.

FUND METHOD OF OPERATION

This committee should also note that although the Fund used dollars

extensively in the past, when we were in a strong balance-of-payments

position all of these dollars have come back to it and, in effect, back

to the 'United States. Thus, while the Fund has been of great benefit

to the world and to the United States, over the entire period of its

operations, our participation in the Fund has not cost us, net, any

dollars at all in our international accounts.

Dollars lent by the Fund in earlier years have been repaid to it and

the Fund now holds U.S. dollars in the amount of about $3,215 million.

These are held almost entirely in the form of non-interest-bearing

notes.

As long as the United States continues to have a balance-of-payments deficit, Fund policy will limit drawings in dollars. And, in any

event, the Fund's existing holdings of dollars will be used to meet the

needs of any future drawings before calls will be made on the new letter

of credit.

Because no dollar expenditure is foreseen, this portion of the appropriation will also have no adverse effect on our balance of payments.

TECHNIQUE OF PROVIDING FUNDS THROUGH LETTERS OF CREDIT

As the committee is aware, the U.S. Government has shifted increasingly to the provision of funds through a letter of credit technique. This amounts to an unconditional obligation to provide funds

as they are actually needed.

This technique is now in general use, both in our domestic programs

and in our dealings with international institutions. It was designed to

obviate expenditures prior to the time when funds are actually needed.

In the past, the technique in dealing with international institutions

was somewhat different. Payments were made to the institution and

excess funds were returned to the U.S. Government in exchange for

non-interest-bearing notes.

I should like to say a word at this point about the nature of the

Fund itself.

Senator SALTONSTALL. Isn't that the same principle as bank clearances in a city?

Mr. DEMING. The letter of credit?

Senator SALTONSTALL. Yes.

Mr. DEMING. The technique?
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 11

Senator SALTONSTALL. Yes. Isn't that the same ?

Mr. DEMING. Not precisely. We use it in domestic affairs for making expenditures until the funds are actually used. It is used in connection with certain payments of the school lunch programs and certain

university grants and things such as that where the U.S. Government

would extend a grant to, for example, the Massachusetts Institute of

Technology, for a particular project, let us say, that it is performing

for the Government.

Instead of giving MIT an entire million dollars, it would give the

institute a letter of credit on which it would draw as the funds become

employed.

Senator SALTONSTALL. I had in mind our dealings with the international institution.

Mr. DEMING. It would work exactly the same way.

Senator SALTONSTALL. Thank you.

CORRECTION OF EXCHANGE RESTRICTIONS, DEPRECIATiON, AND INSTABILITY

Mr. DE1VIING. I should like to say a word at this point about the

nature of the Fund itself. The International Monetary Fund was

established following negotiations at the Bretton Woods Conference of

1944.

The Fund has worked continuously for the elimination of exchange

restrictions, the avoidance of competitive exchange depreciation, and

the promotion of exchange stability. When member countries draw

needed currencies from the Fund they do so to provide financing

for their position while corrective measures are being taken to eliminate a temporary balance-of-payments situation. Any drawing must

be repaid within a 3- to 5-year period.

The point I wish to make is that the International Monetary Fund

should not be confused with institutions whose primary purpose is the

making of long-term loans. Even less should it be confused with

bilateral or multilateral aid programs under which long-term assistance is provided, frequently on very generous credit terms.

When a country draws a needed currency from the Fund, moreover,

it transfers to the Fund an equivalent amount of its own currency.

Accordingly, the assets of the Fund are not reduced when it provides

temporary assistance to a member country. The composition of those

assets is, however, changed, depending upon the gold and currency

composition of the drawings and repayments which have taken place.

In 18 years of Fund operations through the end of 1964, member

countries have drawn over $9 billion in dollars or other currencies.

These drawings have been, or are being, repaid in accordance with

agreed schedules.

EARLY DRAWINGS ON FUND PREDOMINANTLY IN DOLLARS

Prior to 1960, drawings from the Fund were predominantly taken

in the form of dollars and the United States established a strong

creditor position in relation to the Fund. By the end of 1957, gross

drawings of dollars had amounted to nearly $2.7 billion.
12 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

The Fund had purchased additional dollars from the United States

by selling us nearly $600 million worth of gold. At that time, IMF

holdings of dollars represented no more than 28 percent of the U.S.

quota.

INCREASED DOLLAR HOLDINGS THROUGH POLICY REVERSAL

• Following the return to de facto convertibility of the currencies of

Western Europe at the end of 1958, the Fund began increasingly to

provide currencies other than the dollar to countries seeking temporary

financing. This practice was intensified as the balance-of-payments

position of the United States moved into substantial deficit.

Repayments in dollars, however, continued to be large, with the

result that in the period from the end of 1957 to the end of 1962 the

Fund's holdings of dollars increased by more than $1 billion. In this

way the normal operations of the Fund absorbed more than $1 billion

from the reserves of other countries, thus easing our international

financing problems and obviating possible drains upon the U.S. gold

stock.

By the end of 1963, Fund holdings of dollars had been restored to

75 percent of the U.S. quota. At that point the United States was

neither a creditor nor a debtor vis-a-vis the institution.

UNITED STATES DRAWINGS AND USE OF GERMAN MARKS AND FRENCH FRANCS

As I have noted, over the past 15 months the United States has itself,

for the first time, made modest drawings from the Fund. We have

drawn primarily in German marks and French francs and we have

sold the currencies we have drawn, against dollars, to countries wishing

to make repayments to the Fund.

These countries could not use their dollar holdings directly for this

purpose since the Fund does not accept in repayment currencies which

it holds in excess of 75 percent of quota. For the Fund to accept such

currencies—in this instance dollars—would mean that the United

States would be placed in a debtor position vis-a-vis the Fund without

any initiative on our part. This would be inconsistent with the Fund's

method of operation.

Attached to this statement is a chart which shows graphically the

developments of the U.S. position in the Fund which I have just

described.

Senator ELLENDER. In these transactions that we undertook, to save

the dollar by using German marks and French francs, did we sustain

any loss of any kind?

Mr. DEMING. No, sir.

Senator ELLENDER.. By depreciation?

Mr. DEMING. No, sir.

Senator ELLENDER. None at all?

Mr. DEMING. No, sir • none at all. What we did was draw these

currencies from the Fund, sell them to the countries that were making
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 13

repayments to the Fund against dollars, so that we picked up dollars.

They used the currencies to repay the Monetary Fund for their

drawings.

Our current net drawings of approximately $120 million have, of

course, also had the effect of reducing U.S.-dollar liabilities to foreign countries. These countries have paid dollars to us in order to

acquire the particular currencies used to repay the Fund.

(The chart referred to follows:)

U.S. POSITION IN THE INTERNATIONAL MONETARY FUND

3.5

430-

42.5

2.0 

+1.5 

41.0 

4•5 

175% of Quota $.3.1

I 

/7.54 of US Ouolq$2.1

Repurchases wilh

dollars by 0/her

Countries

-1.0 19137

OftcolVeSetratry of V. ha,

'47-'54

Cold Sale

la US

'65 '66 '57

Dollar Holdings of Fund

OW of Period)

115. (kola

Poymen1

'68 '69 '60

Drawings

by US

111

'61 '62 '63 '64

435

+3.0

2.5

+2.0

41.5

+1.0

Dollars Acquired

By Fund

!Owing Period) • .5

Dollars Drown

From Fund - -.5

(During Period)

Note. Fund holdings of dollars equal to 75% of the US quoto represents a balanced paNtion -Me US neither o creditor

nor a debtor ,113.0-1,4 the Fund

Fund hotrhhgs below 75%. US C,tehler posihpn.

Fund noir/mos ODOve 75%. US debtor posdion.

1.0

UNITED STATES ADEQUATELY PROTECTED RE PROPOSED GOLD QUOTA PAYMENTS

Particular attention has been given to the possible effect on the

United States of gold payments to the Fund in connection with the

proposed quota increases. It was clear that, in the normal course of

events, many countries would wish to purchase gold from the United

States in order to pay the gold portion of their quota increase to the

Fund.

Both the Group of Ten and the IMF recognized that, if nonreserve countries utilized their holdings of reserve currencies to acquire gold from reserve currency countries in order to make payments

to the IMF, the result would be both to reduce the gold holdings of the

reserve centers and to actually diminish aggregate world reserves.
14 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

The arrangements that have been worked out and which are described on pages 11 to 13 of the NAC Special Report will provide fully

adequate protection for the U.S. gold stock, while at the same time

providing the Fund with needed liquidity.

PARTIAL QUOTA APPROPRIATION NONACCKFTABLE

Before concluding, I should like to emphasize that the appropriation must be in the full amount of $1,035 million, since then proposed

increase in each country's quota is determined by the resolutions

adopted by the Board of Governors.

The amount of each country's increase cannot be changed without

a reformulation of the entire general and special quota increase proposals. It is thus necessary to have the full amount requested in order

to make our increased subscription payment, even though in practice

we do not expect that the Fund will make use, in the foreseeable future, of the portion payable through a letter of credit.

U.S. ROLE IN BRINGING ABOUT QUOTA INCREASES

The U.S. Government is convinced of the importance of insuring

that adequate resources shall be available to the Fund so that it can

continue to play a vital role in the monetary system of the free world.

For this reason, the United States took a leading part in the discussions of the Group of Ten, at the annual meeting of the Board of Governors in Tokyo and in the deliberations of the Executive Directors

in bringing about the present quota increase proposal.

DESIRABILITY OF CONTINUED LEADERSHIP

It is important for the United States to continue to exercise leadership in this area, at this time when so much attention is being directed

to the strengthening of the international monetary system. No better example of leadership can be given than the prompt approval and

payment of our own subscription.

President Johnson requested in his transmittal letter to the Congress that the quota-increase legislation be given prompt and favorable consideration. The Congress has heeded the President's request

in quickly enacting the authorizing legislation. Equally prompt and

favorable consideration of the necessary appropriation is requested.

PAYMENT HELD IN TRUST PENDING QUOTA ACCEPTANCE BY OTHER COUNTRIES

Senator ELLENDER. How have the other countries reacted to this?

Have they put up theirs?

Mr. DEMING. This is in process. Most countries require the same

sort of legislative approval that we do here. There has been so far—

this has been done quite quickly, you understand just two countries
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 15

which have consented to this increase and have preceded the United

States. There are three small countries, Tanzania, Libya, and Israel.

Senator ELLENDER. Are we to retain this until the others contribute?

Mr. DEMING. Yes. What happens here actually is that we make

our payments to the International Monetary Fund through the transfer of gold and the issuance of the letter of credit.

This is held by the Fund in a special account until two-thirds of

the countries have consented to their quota increases. The deadline is

September 25 of this year.

Senator ELLENDER. How many countries are involved in the Fund?

Mr. DEMING. 102 countries.

Countries that have two-thirds of the quotas have to consent and

make their payments before this becomes effective. It does not mean

that the increase does not become effective until the 102d country

comes in, but as soon as countries which have two-thirds of the quotas

in the Fund have consented to their quota increases, the increases become effective for all those countries that have consented.

Senator ELLENDER. Have we had any drop-outs?

Mr. DEMING. No, sir. Three have left the Fund, that is all.

DRAWING CAPACITY LIMITED BY NONACCEPTANCE OF QUOTA INCREASE

Senator ELLENDER. Do you anticipate that all other countries will

contribute their respective shares?

Mr. DEMING. We are anticipating that all other countries will

come in. One African country, Senegal, has indicated it would not

accept an increase in its quota.

Senator ELLENDER. linlat happens to that?

Mr. DEMING. It just does not get an increase in the quota. It stays

where it is.

Senator ELLENDER. Will it still belong?

Mr. DEMING. It belongs to the International Monetary Fund, but

it has a lower proportion of the quotas and its drawing rights on the

Fund will be smaller as well as its contribution to the Fund.

From a practical standpoint, Senator, the failure of a country such

as this to take an increase in the Fund quota is more of a limiting

factor for it than it is for the Fund, because it is unlikely that anybody

would be drawing Senegalese currency, so this really limits Senegal's

drawing from the Fund, rather than somebody else's drawing from

Senegal.

Senator ELLENDER. Is there any relationship between what a country would draw to the contribution that it makes?

Mr. DEMING. Yes, the quota itself. The quota is a limiting factor

in its drawings. The United States is able to draw up to 125 percent

of its quota, which is $4,125 million at the present time, and would be

$5,160 million when the quota increase enters in effect.

48-740-65 3
16 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

ACTUAL REDUCTION IN TREASURY GOLD STOCK

Senator ELLENDER. As I understand, in this instance we are going

to have to put up $258.75 million in gold, which will affect our gold

holdings, but you counter that by saying that we get an asset for our

gold.

Mr. DEMING. There is no question about the fact that the Treasury

gold stock is reduced by this amount. It is replaced in our asset holdings by an equivalent amount of gold tranche drawing rights. This

is merely a transfer of a portion of the reserve that we presently hold

from one form to another, and it shows in our international reserve in

terms of the total.

It does not change our international reserve position at all. It does

permit us, with the increase in our Fund quota to draw more from the

Fund should we need to.

EFFECT ON U.S. WORLD FINANCIAL IMAGE

Senator ELLENDER. But it does blunt our position in the eyes of the

people of the world in that it reduces our gold holdings. Our reserve

of gold has been decreasing and decreasing, which would have an

adverse effect on our own dollar.

Mr. DEMING. Well, I think, Senator, in this case it is thoroughly

understood that all countries will be putting up portions of gold, and

in that sense in the various countries the gold reserve will be going

down, but they will be changing this for assets in the Internal Monetary Fund and I do not think that any central banker abroad will

view this as an adverse movement of the American gold stock.

Senator ELLENDER. But you know the shape we are in. All the

losses we have sustained in the past years in our gold reserve have gone

to Western Europe.

Mr. DEMING. That is right.

Senator ROBERTSON. Have you finished your testimony?

Mr. DEMING. Yes, sir.

REQTJIREMENT OF FULL COMMITTEE CONSIDERATION FOR OVERALL PROGRAM OF

INTERNATIONAL COOPERATION

Senator ROBERTSON. I am sure, in light of the questions that have

been asked, the testimony that has been given, the full committee will

understand, first, why I did not want to take this up in a subcommittee

whose jurisdiction was limited to appropriations for two departments:

the Treasury and the Post Office.

I do not think too highly of omnibus bills or riders.
oUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 17

In the second place, being what you might call a mountaineer, a

country boy, I hope I will never get to the point where I think a

billion dollars is a small amount of money, and if this Congress ever

gets to the point where it can add a billion dollars to any item without

any hearings, it means it is not too long before we are going to run

out of dollars.

We cannot put a billion dollars here, a billion dollars there, and

everywhere without any hearings and keep the supply in hand.

Now, the Senator from Louisiana has touched upon a point which is

undoubtedly true, that we are going back to a period of 20 years ago

when we were moving into an overall program of international

cooperation.

LEAGUE OF NATIONS AND UNITED NATIONS EXPERIENCES

Now I was a believer in the League of Nations. I was sorry we did

not go into it, although afterward it proved ineffectual. Mussolini

moved into Ethiopia. Hitler moved into Austria.

There was no power to step in. At the end of World War II we

said, "We will have a league and put some teeth in it." We went out

to San Francisco in April to draft a United Nations Charter and, unfortunately, we were afraid that if we put the teeth in it to stop

aggression, some little nation might suck us into a war that we

did not want to be in.

We wrote in there that certain other nations would be members of

the council, each with a veto power of using the teeth. Russia has

exercised that veto power 108 times, and the teeth of the United

Nations are just plain gums. They won't bite anybody.

I read in the paper today that the United Nations is gradually unraveling, and I have previously heard that the 19 nations that we

helped to create in darkest, Africa now have the balance of power

in the General Assembly. Some of those tribes cannot read and write

and they have a vote equal to us in the United Nations.

AGENCIES ENGAGING IN 1945 IN INTERNATIONAL FINANCING

But to come back to the program of 20 years ago. Mr. Chairman,

I ask unanimous consent to have printed in the record a chart entitled "U.S. and International Agencies Engaged in Overseas Credit

and Financing Operations," and a copy of the latest, Treasury statement indicating the condition of various financial accounts.

Senator HAYDEN. That shall be done.

(The chart referred to follows:)
U.S. AND INTERNATIONAL AGENCIES ENGAGED IN OVERSEAS CREDIT AND FINANCING OPERATIONS

Export-Import

Bank (Eximbank)

(dollars)

Agency for International Development

(AID)

Dollars Foreign currencies

(Cooley loans)

International ,

'Monetary Fund

(IMF) (currencies

of member court- tries, gold, and

dollars)

International

Bank (I BRD)

(currencies of

member countries)

International

Finance Corporation (IFC)

(dollars)

International

Development

Association (IDA)

(currencies of

mein ber cowl tries)

Inter-American

Development

Bank (IDB)

(currencies of

member countries,

principally dollars)

Special looter.

American Fund

for Social Progress (IDB administered

trust Fund)

(dollars)

Purpose..

Resources

Nature of loans

Nature of gu

tees.

Assist in funwcing,

and facilitating,

U.S. exports and

imports.

$9,04000,000 of

lending authority.

Promote the economic development of less- developed countries—emphasizing long-range

programs designed to develop

economic

sources and increase Produc- tive capacities.,

Authorized $8,550,-

000,000 for period

fiscal years 1062-

66. Through

fiscal year 1064,

$3,574,800,000 was

appropriated.

(1) Project loans; Loans to foreign

i.e., to foreign governments,

governments public earn les,

and private acid private

enterprises firms Waited

(United :States State, or fore(gn)

and foreign) for for purposes

purchases of which promote

U.S. goods and economic de- services tor de- veloPmeat•

velopment

projects abroad;

and (2) exporter credits.

Export credit in- Full or partial

surance on short guarantees up to

and medium $2,500,000.000 of

suppliers' credits private U.S.-

in Partnership owned in vest- with private ment against

insurance associ- expropriation,

atioas and inconvertibilit y,

guarantees war damage, and

of loans by prl- certain political

vale lenders for risks; partial

purposes noted guarantees up to

above. $180,000,000

against all risks;

guarantees of

investments up

to 5150,000,000

for self-liquidating pilot housing

projects.

Assist foreign economic development and expan- sion of markets

for U.S. surplus

agricultural commodities.

Up 10 20 percent of

proceeds of sales

of surplus agricultural commodities under

title tot Public

Law 450.

Loans to (1) private U.S. companies only,

including their

subsidiaries and

affiliates abroad,

and (2) U.S. or

local private

companies for

expanding markets for U.S.

agricultural

commodities

abroad.

Not applicable

Promote international monetary

cooperation and

encourage stability by providing

resources to meet

short-term

balance-cfpayments problems and by

other means.

Resources consist

of gold and bold- logs of member

currencies aggregating $15,600,

000,000. The

U.S. quota is

54,125,000,001.1.

Take form of a

mera bees purchase from the

Fund of the currencies of other

members for im

equivalent

amount of the

member's owl(

currency. A

member's purchase of currency

Irons the Fund

must be repaid

by repurchases.

Not applicable 

Aid the development of productive facilities and

resources in

member coon- Capital subscriptions of member

countries-521,-

100,08o,000, of

which approximately 02,100,-

000,000 paid in

and $19,000,000,-

000 is callable.

U.S. subscription 66,350,000,- 000, of which $5,-

700,000,600 is callable, if required

by the Bank to

'meet its oblige- Lions.

Loans to member

governments,

and to other

public or private

entities if guaranteed by a

member government.

Full or partial

guarantees of

loans by private

lenders for purPows noted

above, if such

loans are guaranteed by a member government.

Guarantee authority has not

been exercised.

Further economic

development by

encouraging

growth of productive private

enterprise in less

developed member countries.

Capital subscriptions of member

coiwtries of $99,-

000,000, sod proceeds of sale of

Investments.

Investments in

productive private enterprises.

May now subscribe to their

capita! stock.

Guarantee of

member government not sought.

Not applicable

Promote economic

development in

member cow,

tries by providing finance on

terms not possible under

IBRD, of which

IDA is an affiliate.

$995,700,000 sag- scribed. U.S.

subscription is

$320,300,000. Review of resources

required every 5

years, with a

view to repleubluetit.

Credits to member

governments or

political subd (-

visions of such

members and to

public or private

entitiesin territories of a

tueniber.

Not applicalkle

Contribute to accelerating process of economic

development iu

member countries.

Authorized capital

of $1,800,000,0o0

(U.S. share $762,-

(00,000) for "Ordinary operations." $218,-

500,000 for "Fund

for Special Operations," of which

U.S. share is

$150,000,000.

Making, or participating indirect loans to

member governments and private entitiesin

those countries.

May guarantee in

whole or in part

loans by private

investors.

Provide capital and

technical assistance to support

efforts of Latin

American countries to achieve

greater social progress und balanced

ecoumnic growth.

5525,000,000 appropriated by the

United States.

Loans to governments, public

institutions, Private borrowers

and cooperatives,

in fields of land

settlement and

use, low income

housing, community water and

sanitation, and,

to a limited extent, higher

education.

Not applicable.

00

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 
Relationship to

other sources of

financing.

M amity of loans__

Currency of repayment.

Interest rate or fee_ _ Cannot compete with private cap- ital, and does not loan where pri- vate capital available on rea- sonable terms. Generally up to 5 years on exporter credits; up to 20 years on project loans. U.S. dollars Current rate 554

percent for development loans.

Exporter credits

at higher rates.

Must take into

account whether

financing could

be obtained from

other free world

SOLUTE'S 011 reason able terms.

Generally up 10 40

years with provision for grace

period up to 10

years prior to

start of amortization of principal.

U.S. dollars 

Most loans to governments, Si Per- cent during grace

Period and Spec- cent thereafter.

Not applicable 

Depending upon

the economics ofthe project but

generally not

more than 10

years.

Foreign currency

loaned.

Related to prevailIng local rate.

Where proceeds of

loan must be

spent, including

guaranteed private loans.

In the United

States. Ilrfnegestils. In country whose currency is loaned.

Decisionmaking

body.

Board of Directors

with advice of

Administrator of

AID with

Administrator of

AID, with genNational Advisory Council on advice of Development eral advice of NAC.

International

Monetary and

Financial Prot,-

lems (NAC).

Loan Committee, with general

advice of NAC.

Legal authority Eximbank Act of

1945, as amended.

Foreign Assistance Act of 1961,

as amended.

Sec. 104(e) of title

I, Public Law

480 (Cooley

amendment)•

Cooperates with

and acts through

member countries treasuries,

central banks,

stabilization

funds, or similar

fiscal agencies.

Members undertake to repurchase (repay) within a period

not exceeding 3

to 5 years.

Gold or convertible

ceurency.

Service charge of

oftIS percent

plus interest

on purchases in

excess of quota

Increasing with

length of time

purchases outstanding and

amount purchased. Lowest

rate is 2 percent

per anntini.

Not limited to

U.S. procurement.

Board of Governors or, as delegated, the Board

of Directors;

U.S. Director

instructed by

NAC.

Articles of Agreement, and Bretton Woods Act.

Cannot lend where Cannot invest Cannot lend where Cooperates with Must take into

private capital where sufHeient private capital other sources of account whether

available on private capital available on financing. Takes aaistance can be

reasonable terms, available on reasonable terms into account the obtained from

reasonable terms., or where financ• ability of bor. national or inter- nog could be rowers to obtain national agencies

provided by private loans on or private sources

loan of type. terms which in on reasonable

made by IBRD. the Bank's opin- terms.

ion are reasonable, taking into

account all pertinent factors.

Generally 15 to 25 Generally about 10 Alleredits so far 10 to 20 years on Generally 15 to 30

years. years. extended for 50 basis of experi- years.

years with 10- ener to date,

year grace period

and graduated

amortization.

Currency lent Currency in- Currency lent, or For "ordinary" Lfugely in the curvested—usually other foreign "operations" in rency of the

U.S. dollars, exchange as currency lent; borrowing

appropriate. for "special country.

operations" in

whole or part in

currency of country where project is located.

5)5 percent cur- Currently about No interest; 34 of "Ordinary opera- 3)0 percent for warently. 7 percent for 1 percent service tions" 6 percent; ter and sewer

loans. No fixed charge. ''special opera- systems, includreturn on equity tions" 4 percent; log a 31 of!Per- participations. payable in cur- cent service charge

rency loaned, payable in dollars. 2 percent

for other projects, including 3i percent service charge

payable in dollars.

Not limited to Not limited to Not limited to Not limited to Limited to United

U.S. procure- U.S. procure- U.S. procure- U.S. procure- States and monument. ment. ment, moat. her eamtries of

IDB.

Board of Dover- Board of Dover- Board of Dover- Board of Dover- IDB Board of Gov- noes or, as dele- nors or, as dote- nors or, as dele- noes or, as del. ernors, acting as

gated, the Board gated, the Board gated, the Board gated, the Board trustees, or as

of Directors; of Directors; of Directors; of Directors; delegated, I DB

U.S. Director U.S. Director U.S. Director U.S. Director Board of Direcinstructed by instructed by instructed by instructed by tors; U.S. Director

NAC, NAC, NAC. NAC. instructed by

NAC.

Articles of Agree- Articles of Agree- Articles of Agree- Articles establish- Agreement establishment, and Bret- ment, and Inter- ment, and Inter- ing the Inter- lag the Social

Ian Woods Act. national Finance national Devel- American Bank, Progress Trust

Corporation Act. opment Associa- and Inter- Fund and Act,

tion Act. American Devel- authorizing Interopment Bank American Social

Act. and Economic

Cooperation program..

. IMF's contribution In economic development efforts, while important, is indirect rather than direct.

AID alas extends grant assistance for development. In some circumstancce, supporting assistance may

take the form of a loan. The interest rate is generally, 3)1 percent, with maturity up to 40 years including

a grace period upon 10 years.

Revised Aug. 14, 1964.

. Social Progress Trust Fund agreement between the United States and the IDB signed June 19, 1961,

Source; Office of Development Financing and Private Enterprise, AID, July 31,1904,

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 

L
•

20 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

BRM ION WOODS AGREEMENTS ACT

Senator ROBERTSON. I also ask to have placed in the record the act

of 1945 that created the International Monetary Fund to show what its

powers were.

(The act referred to follows:)

[PUBLIC LAW 171-79TH CONGRESS]

[CHAPTER 339-1sT SESSION]

[H.R. 3314]

An Act to provide for the participation of the United States in the International, Monetary

Fund and the International Bank for Reconstruction and Development

Be it enacted by the Senate and House of Representatives of th,e United States

of America in Congress assembled,

SHORT TITLE

SEcTioN 1. This Act may be cited as the "Bretton Woods Agreements Act".

ACCEPTANCE OF MEMBERSHIP

SEC. 2. The President is hereby authorized to accept membership for the

United States in the International Monetary Fund (hereinafter referred to as the

"Fund"), and in the International Bank for Reconstruction and Development

(hereinafter referred to as the "Bank"), provided for by the Articles of Agreement of the Fund and the Articles of Agreement of the Bank as set forth in the

Final Act of the United Nations Monetary and Financial Conference dated July

22, 1944, and deposited in the archives of the Department of State.

APPOINTMENT OF GOVERNORS, EXECUTIVE DIRECTORS, AND ALTERNATES

SEC. 3. (a) The President, by and with the advice and consent of the Senate,

shall appoint a governor of the Fund who shall also serve as a governor of the

Bank, and an executive director of the Fund and an executive director of the

Bank. The executive directors so appointed shall also serve as provisional executive directors of the Fund and the Bank for the purposes of the respective Articles

of Agreement. The term of office for the governor of the Fund and

of the Bank shall be five years. The term of office for the executive directors

shall be two years and the excutive directors shall remain in office until their

successors have been appointed.

(b) The President, by and with the advice and consent of the Senate, shall

appoint an alternate for the governor of the Fund who shall also serve as alternate for the governor of the Bank. The President, by and with the advice and

consent of the Senate, shall appoint an alternate for each of the executive directors. The alternate for each executive director shall be appointed from among

individuals recommended to the President by the executive director. The terms

of office for alternates for the governor and the executive directors shall be

the same as the terms 'specified in subsection (a) for the governor and executive

directors.

(c) No person shall he entitled to receive any salary or other compensation

from the United States for services as a governor, executive director, or alternate.

NATIONAL ADVISORY COUNCIL ON INTERNATIONAL MONETARY AND FINANCIAL

PROBLEMS

SEC. 4. (a) In order to coordinate the policies and operations of the representatives of the United States on the Fund and the Bank and of all agencies of the

Government which make or participate in making foreign loans or which engage

in foreign financial, exchange or monetary transactions, there is hereby established the National Advisory Council on International Monetary and Financial

Problems (hereinafter referred to as the "Council"), consisting of the Secretary

of the Treasury, as Chairman, the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve System,

and the Chairman of the Board of Trustees of the Export-Import Bank of

Washington.

z
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 21

(b) (1) The Council, after consultation with the representatives of the United

States on the Fund and the Bank. shall recommend to the President general

policy directives for the guidance of the representatives of the United States

on the Fund and the Bank.

(2) The Council shall advise and consult with the President and the representatives of the United States on the Fund and the Bank on major problems arising

in the administration of the Fund and the Bank.

(3) The Council shall coordinate, by consultation or otherwise, so far as

practicable, the policies and operations of the representatives of the United

States on the Fund and the Bank, the Export-Import Bank of Washington and

all other agencies of the Government to the extent that they make or participate

in the making of foreign loans or engage in foreign financial, exchange or monetary transactions.

(4) Whenever, under the Articles of Agreement of the Fund or the Articles

of Agreement of the Bank, the approval, consent or agreement of the United

States is required before an act may be done by the respective institutions, the

decision as to whether such approval, consent, or agreement, shall be given or

refused shall (to the extent such decision is not prohibited by section 5 of this

Act) be made by the Council, under the general direction of the President. No

governor, executive director, or alternate representing the United States shall

vote in favor of any waiver of condition under article V, section 4, or in favor

of any declaration of the United States dollar as a scarce currency under article

VII, section 3, of the Articles of Agreement of the Fund, without prior approval

of the Council.

(5) The Council from time to time, but not less frequently than every six

months, shall transmit to the President and to the Congress a report with respect

to the participation of the United States in the Fund and the Bank.

(6) The Council shall also transmit to the President and to the Congress

special reports on the operations and policies of the Fund and the Bank, as

provided in this paragraph. The first report shall be made not later than two

years after the establishment of the Fund and the Bank, and a report shall be

made every two years after the making of the first report. Each such report

shall cover and include: The extent to which the Fund and the Bank have

achieved the purposes for which they were established; the extent to which the

operations and policies of the Fund and the Bank have adhered to, or departed

from, the general policy directives formulated by the Council, and the Council's

recommendations in connection therewith: the extent to which the operations

and policies of the Fund and the Bank have been coordinated, and the Council's

recommendations in connection therewith; recommendations on whether the resources of the Fund and the Bank should be increased or decreased; recommendations as to how the Fund and the Bank may be made more effective; recommendations on any other necessary or desirable changes in the Articles of Agreement of

the Fund and of the Bank or in this Act; and an over-all appraisal of the extent

to which the operations and policies of the Fund and the Bank have served, and

in the future may be expected to serve, the interests of the United States and the

world in promoting sound international economic cooperation and furthering

world security.

(7) The Council shall make such reports and recommendations to the President

as he may from time to time request, or as the Council may consider necessary to

more effectively or efficiently accomplish the purposes of this Act or the purposes

for which the Council is created.

(c) The representatives of the United States on the Fund and the Bank, and

the Export-Import Bank of Washington (and all other agencies of the Government to the extent that they make or participate in the making of foreign loans

or engage in foreign financial, exchange or monetary transactions) shall keep the

Council fully informed of their activities and shall provide the Council with such

further information or data in their possession as the Council may deem necessary

to the appropriate discharge of its responsibilities under this Act.

CERTAIN AS NOT TO BE TAKEN WITHOUT AUTHORIZATION

SEC. 5. Unless Congress by law authorizes such action, neither the President

nor any person or agency shall on behalf of the United States (a) request or

consent to any change in the quota of the United States under article III, section

2, of the Articles of Agreement of the Fund; (b) propose or agree to any change

in the par value of the United States dollar under article VI, section.5, or article
•

22 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

XX, section 4, of the Articles of Agreement of the Fund, or approve any general

change in par values under article IV, section 7; (c) subscribe to additional

shares of stock under article II, section 3, of the Articles of Agreement of the

Bank; (d) accept any amendment under article XVII of the Articles of Agreement of the Fund or article VIII of the Articles of Agreement of the Bank; (e)

make any loan to the Fund or the Bank. Unless Congress by law authorizes

such action, no governor or alternate appointed to represent the United States

shall vote for an increase of capital stoek of the Bank under article II, section

2, of the Articles of Agreement of the Bank.

DEPOSITORIES

SEC. 6. Any Federal Reserve bank which is requested to do so by the Fund

or the Bank shall act as its depository or as its fiscal agent, and the Board of

Governors of the Federal Reserve System shall supervise and direct the carrying out of these functions by the Federal Reserve banks.

PAYMENT OF SUBSCRIPTIONS

SEC. 7.(a) Subsection (c) of section 10 of the Gold Reserve Act of 1934, as

amended (U.S.C., title 31, sec. 822a), is amended to read as follows:

"(c) The Secretary of the Treasury is directed to use $1,800,000,000 of the

fund established in this section to pay part of the subscription of the United

States to the International Monetary Fund; and any repayment thereof shall be

covered into the Treasury as a miscellaneous receipt."

(b) The Secretary of the Treasury is authorized to pay the balance of

$950,000,000 of the subscription of the United States to the Fund not provided

for in subsection (a) and to pay the subscription of the United States to the

Bank from time to time when payments are required to be made to the Bank.

For the purpose of making these payments, the ,Secretary of the Treasury is authorized to use as a public-debt transaction not to exceed $4,125,000,000 of the

proceeds of any securities hereafter issued under the Second Liberty Bond Act,

as amended, and the purposes for which securities may be issued under that Act

are extended to include such purpose. Payment under this subsection of the

subscription of the United States to the Fund or the Bank and repayments thereof

shall be treated as public-debt transactions of the United States.

(c) For the purpose of keeping to a minimum the cost to the United States of

participation in the Fund and the Bank, the Secretary of the Treasury, after

paying the subscription of the United to the Fund, and any part of the subscription of the United States to the Bank required to be made under article

II, section 7(1), of the Articles of Agreement of the Bank, is authorized and

directed to issue special notes of the United States from time to time at par

and to deliver such notes to the Fund and the Bank in exchange for dollars to

the extent permitted by the respective Articles of Agreement. The special notes

provided for in this subsection shall be issued under the authority and subject

to the provisions of the Second Liberty Bond Act, as amended, and the purposes

for which securities may be issued under that Act are extended to include the

purposes for which special notes are authorized and directed to be issued under

this subsection, but such notes shall bear no interest, shall be non-negotiable

and shall be payable on demand of the Fund or the Bank, as the case may be.

The face amount of special notes issued to the Fund under the authority of this

subsection and outstanding at any one time shall not exceed in the aggregate the

amount of the subscription of the United States actually paid to the Fund, and

the face 'amount of such notes issued to the Bank and outstanding at any one time

shall not exceed in the aggregate the amount of the subscription of the United

States actually paid to the Bank under article II, section 7(i), of the Articles

of Agreement of the Bank.

(d) Any payment made to the United 'States by the Fund or the Bank as a

distribution of net income shall be covered Into the Treasury as a miscellaneous

receipt.

OBTAINING AND FURNISHING INFORMATION

SEC. 8. (a) Whenever a request is made by the Fund to the United States

as a member to furnish data under article VIII, section 5, of the Articles of

Agreement of the Fund, the President may, through any agency he may desig-
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 23

nate, require any person to furnish such information as the President may

determine to be essential to comply with such request. In making such determination the President shall seek to collect the information only in such detail

as is necessary to comply with the request of the Fund. No information so

acquired shall be furnished to the Fund in such detail that the affairs of any

person are disclosed.

(b) In the event any person refuses to furnish such information when requested to do so, the President, through any designated governmental agency,

may by subpoena require such person to appear and testify or to appear and

produce records and other documents, or both. In case of contumacy by, or

refusal to obey a subpoena served upon any such person, the district court for

any district in which such person is found or resides or transacts business, upon

application by the President or any governmental agency designated by him,

shall have jurisdiction to issue an order requiring such person to appear and

give testimony or apear and produce records and documents, or both; and any

failure to obey such order of the court may be punished by such court as a

contempt thereof.

(c) It shall be unlawful for any officer or employee of the Government,

or any advisor or consultant to the Government, to disclose, otherwise than in

the course of official duty, any information obtained under this section, or

to use any such information for his personal benefit. Whoever violates any

of the provisions of this subsection shall, upon conviction, be fined not more

than $5,000, or imprisoned for not more than five years, or both.

(d) The term "person" as used in this section means an individual, partnership, corporation or association.

FINANCIAL TRANSACTIONS WITH FOREIGN GOVERNMENTS IN DEFAULT

SEC. 9. The Act entitled "An Act to prohibit financial transactions with any

foreign government in default on its obligations to the United States", approved

April 13, 1934 (U.S.C., title 31, sec. 804a), is amended by adding at the end thereof

a new section to read as follows:

"SEC. 3. While any foreign government is a member both of the International

Monetary Fund and of the International Bank for Reconstruction and Development, this Act shall not apply to the sale or purchase of bonds, securities, or

other obligations of such government or any political subdivision thereof or of

any organization or association acting for or on behalf of such government

or political subdivision, or to the making of any loan to such government, political subdivision, organization, or association."

JURISDICTION AND VENUE OF ACTIONS

SEC. 10. For the purpose of any action which may be brought within the United

States or its Territories or possessions by or against the Fund or the Bank in

accordance with the Articles of Agreement of the Fund or the Articles of Agreement of the Bank, the Fund or the Bank, as the case may be, shall be deemed

to be an inhabitant of the Federal judicial district in which its principal office

in the United States is located, and any such action at law or in equity to which

either the Fund or the Bank shall be a party shall be deemed to arise under the

laws of the United States, and the district courts of the United States shall have

original jurisdiction of any such action. When either the Fund or the Bank is

a defendant in any such action, it may, at any time before the trial thereof,

remove such action from a State court into the district court of the United States

for the proper district by following the procedure for removal of causes otherwise provided by law.

STATUS, IMMUNITIES, AND PRIVILEGES

SEC. 11. The provisions of article IX, sections 2 to 9, both inclusive, and the

first sentence of article VIII, section 2 (b), of the Articles of Agreement of the

Fund, and the provisions of article VI, section 5 (i), and article VII, sections 2

to 9, both inclusive, of the Articles of Agreement of the Bank, shall have full
24 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

force and effect in the United States and its Territories and possessions upon

acceptance of membership by the United States in, and the establishment of, the

Fund and the Bank, respectively.

STABILIZATION LOANS BY THE BANK

SEC. 12. The governor and executive director of the Bank appointed by the

United States are hereby directed to obtain promptly an official int.rpretation

by the Bank as to its authority to make or guarantee loans for programs of

economic reconstruction and the reconstruction of monetary systems, including

long-term stabilization loans. If the Bank does not interpret its powers to

include the making or guaranteeing of such loans, the governor of the Bank

representing the United States is hereby directed to propose promptly and support an amendment to the Articles of Agreement for the purpose of explicitly

authorizing the Bank, after consultation with the Fund, to make or guarantee

such loans. The President is hereby authorized and directed to accept an

amendment to that effect on behalf of the United States.

STABILIZATION OPERATIONS BY THE FUND

SEC. 13. (a) The governor and executive director of the Fund appointed by

the United States are hereby directed to obtain promptly an official interpretation by the Fund as to whether its authority to use its resources extends beyond

current monetary stabilization operations to afford temporary assistance to

members in connection with seasonal, cyclical, and emergency fluctuations in the

balance of payments of any member for current transactions, and whether it has

authority to use its resources to provide facilities for relief, reconstruction, or

armaments, or to meet a large or sustained outflow of capital on the part of

any member.

(b) If the interpretation by the Fund answers in the affirmative any of the

questions stated in subsection (a), the governor of the Fund representing the

United States is hereby directed to propose promptly and support an amendment to the Articles of Agreement for the purpose of expressly negativing such

interpretation. The President is hereby authorized and directed to accept an

amendment to that effect on behalf of the United States.

FURTHER PROMOTION OF INTERNATIONAL ECONOMIC RELATIONS

SEC. 14. In the realization that additional measures of international economic

cooperation are necessary to facilitate the expansion and balanced growth of

international trade and render most effective the operations of the Fund and the

Bank, it is hereby declared to be the policy of the United States to seek to bring

about further agreement and cooperation among nations and international bodies,

as soon as possible, on ways and means which will best reduce obstacles to and

restrictions upon international trade, eliminate unfair trade practices, promote

mutually advantageous commercial relations, and otherwise facilitate the expansion and balanced growth of international trade and promote the stability of

international economic relations. In considering the policies of the United States

in foreign lending and the policies of the Fund and the Bank, particularly in

conducting exchange transactions, the Council and the United States, representatives on the Fund and the Bank shall give careful consideration to the progress

which has been made in achieving such agreement and cooperation.

Approved July 31,1945.
Daily Statement of the United Slates Treasury

MAY 27, 1965

TABLE I--ACCOUNT OF TREASURER OF THE UNITED STATES

ASSETS

Gold (oz. 408,368,850.5) 

(Amount on May 27, 1964

was $15,463, 012, 510. 97)

114,292,909,768.87

LIABILITIES

Gold certificates (series of 1934) 

Gold certificate fund - Federal Reserve System 

Redemption fund - Federal Reserve notes 

Gold reserve against United States notes

Balance of gold 

12,816,055,600.00

9,660,087,296.12

1,546,853,299.26

156,039,430.93

113,874,142.56

Total 14,292,909,768.87 Total 14,292,909,768.87

MiZr (cloolia1r DC(0)Z2.93,,g1:°5)92.1 ) 

1,293,316,713.11

2,971,012.00

Silver certificates (issued after June 30,

Balance of Silver 

1929) 317,g:'.11°1

Total 1,296,287,725.11 Total 1,296,287 725 11

Gold balance (as above) 

Deposits in Federal Reserve Banks - Available fundsDeposits in special depositaries, Treasury Tax and

3:774:1:Z7

Loan Accounts 9,013,318,079.65

Treasury operating balance 9,879,381,168.72

Deposits in Federal Reserve Banks - In process of

collection 166,578,676.51

Deposits in other depositaries 300,068,642.30

Silver balance (as above) 351,226,229.11

Subsidiary coin (oz. 8,959,453.9 ) 12,385,628.30

Other silver bullion (oz. 33,426,146.7) 36,622,782.76

Other coin and currency 120,020,235.28

Unclassified collections, uncollected items, exchanges,

etc. (net) 34,514,422.48 Balance, Treasurer's general account' 10,900,7_97„185.46

Total 10,900,797,185.46 Total 10,900,797,185.46

TABLE II--CHANGES IN BALANCE OF ACCOUNT OF TREASURER, U.S.

Classification This month

to date

Corresponding

month

last year 2

Fiscal year 1965

to date

(Beginning July I, 1%4)

Corresponding

period fy 19642

(Beginning July ), 1963)

Balance of account, beginning of period 89,336,024,490.27 06,085,067,437.08 111,035,731,209.07 812,116,176,163.41

Excess of deposits (+) or withdrawals(-), public debt accounts (Table III).Excess of deposits (+) or withdrawals (-), budget, trust and other

accounts (Table IV) 

Sales and redemptions of securities of Government agencies in market

(net), excess of deposits (sales) (+) or withdrawals (redemptions) (-) 

Clearing accounts:

Excess of deposits (-) or checks issued (+) classified in Table Illor IV

for which the documents have not yet been received by the

-610,327,904.82

+1,648,444,202.97

+321,093,994.45

+515,257,674.12

+873,994,228.51

-1,891,663.21

+6,114,797,909.62

-4,813,476,824.62

-65,911,364.46

+3,347,042,025.99

-7,855,922,232.85

+452,458,211.04

Treasurer, U.S. 

Excess of deposits (+)or checks cleared (-)at Federal Reserve Banks,

which have affected the Treasurer's balance, but not yet classified .

+474,002,195.36

-268,439,792.77

+1,055,887,809.23

-187,809,918.57

-117,074,716.78

-1a51,2!9,027.37

-5,303,785,028.52

+5,584,536,428.09

Balance of account, this date (Table I) 10,900,797,185.46 8,340,505,567.16 10,900,797,185.46 8,340,505,567.16

See footnotes at end of table, p. 28.

SUPPLEMENTAL HEARINGS TREASURY AND POST 

CT)

•
TABLE III—CHANGES IN THE PUBLIC DEBT

Classification This month to date Corresponding month last year2 Fiscal year 1965 to date (Beginning July 1, 1964) Corresponding period fy 19642 (Beginning July 1, 1983)

Gross public debt at beginning of period 9316,556,644,357.69 9307,600.680.871.64 ;311.712,899.257.30 8305.859.632.996.41

Increase (+) or decrease (-) in the gross public debt:3

Public issues:

Marketable:

Treasury bills -19,327,000.00 +1,081,490,000.00 .6,166,431,000.00 .4.902,857,000.00

Certificates of indebtedness -6,000.00 -4,196,994,000.00 -701,500.00 -22,168.800,300.00

Treasury notes -2,496,526,000.00 +2,278,760,000.00 -14,751,794,050.00 .15 "11,597,100.00

Treasury bonds .2,025,160,550.00 .1,502,059,900.00 .14,036,255,600.00 .6 ,16,142,400.00

Other -8,918.75 41,966.00 -176,666.00 496,922.75

Total marketable issues -490,707,368.75 +665,303,934.00 +5,450,014,384.00 .4,481,509,277.25

Non-marketable:

- - - United States savings bonds -72,299,265.18 -46,673,453.19 .564,278,232.94 +782,004,339.69

Treasury bonds, investment series -3,186,000.00 -6,508,000.00 -263,690,000.00 -363,737,000.00

Other -17,412,226.61 +71,537,115.11 .700,952,090.41 -15,032,027.74

Total non-marketable issues -92,897,491.79 .18,355,661.92 +1,001,540,323.35 +398,235,311.95

Total public issues -583,604,860.54 +683,659,595.92+6,451,554,707.35 +4,879,744,589.20

Special issues +3,804,557,017.21 .2,030,988129.54 +1,579,399,698.25 -765,781,459.91

Other issues -203,373,804.00 -3,088,395.00

----- --- -- - -169,630,952.54 - - - .339,C41.076.40

+3,017,578,352.67 Change in gross public debt +2,71 1,559,330.46 +7,881,323,453.06 +4,452,607,205.69

Gross public debt this date 319,574,222,710.36 310,312,240,202.10 310.212,240.262110

— • — • — Change in gross public debt, increase (+) or decrease (-) +3,017,578,352.67 +2,711,559,330.46

_319,574,222,710.36

+7,861,323,453,06

_ +4,452,e07,205.69

Investments of Government agencies in public debt securities (net),

excess of purchases (-) or redemptions (+) -3,895,894,301,17 -2,254,163,718.96 -1,556,385,153.25 -173,057,650.12

Public debt redemptions included as withdrawals in Table IV (+) (Table V) +395,443,300.52 +176,005,536.68 +3,106,753,951.41 +2,012,925,520.34

Accruals on savings and retirement plan bonds and

Treasury bills (-) (Table V) -127,455,256.84 -118.143,474.06 -3,256,894,341.60 -2,945,433,052.12

Excess of deposits (+) or withdrawals (-), public debt (Table II) -610,327,904.82 .5K,257,674.12 +6,114,797,909.62 +3,347,042,025.99

•

Irons public debt this date 

--- • — 

— 319,574,222,710.36 310,312,240,202.10 319,574,222,710.36 310,312,240,202.10

3uaranteed debt of U.S. Government agencies 603,041,475.00 834,393,500.00 803,041,475.00 824,393,500.00

Total gross public debt and guaranteed debt 

Deduct debt not subject to statutory limitation 320,11173,41:1:::gT 311,1g1:119,;:i:303 6 320,278;:g1:14:gT "1,1G,R1,7,011:3(1

Total debt subject to limitation' 319,893,527,040.85 310,774,693,954.80 319,893,527,040.85 310,774,693,954.80

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 
MAY 27,1965

TABLE IV—ANALYSIS OF CERTAIN DEPOSITS AND WITHDRAWALS

(RELATING TO BUDGET, TRUST, AND OTHER ACCOUNTS)

[The classifications of deposits and withdrawals in this table are those that are derived from the account of the Treasurer of the United States, and do not purport to be transactions affecting budget surplus or deficit. Transactions classified separately as to budget and nonbudget are published in the Monthly Statement of Receipts and Expenditures of the United States Government.

Classification Thisto date month Corresponding month last year 2 Fiscal year 1965 to date . (Beginning July 1, 1964) Corresponding period fy 1964 2 (Beginning July I. 1963)

DEPOSITS

Internal revenue:

Withheld individual income and Federal Insurance Contributions Act

taxes' 18,527,901,451.20 87,099,213,204.02 147,960,493,317.69 149,891,503,322.79

Other individual income and Self-Employment Contributions Act

taxes, 1,354,757,244.32 1,138,756,544.65 15,644,917,286.76 14,192,130,230.33

Corporation income taxes 504,249,231.56 490,443,100.47 19,536,449,296.70 18,128,670,626.5E

Excise taxes 1,324,011,130.03 1,184,646,965.72 13,436,180,794.16 12,628,388,777.19

Railroad Retirement Tax Act 86,403,868.81 81,192,952.58 564,270,454.03 543,201,388.26

Federal Unemployment Tax Act 3,524,546.87 3,740,023.40 621,087,473.70 848,498,029.39

Estate and gift taxes 286,374,947.91 266,425,503.63 2,494,694,082.58 2,213,271,725.18

Customs 112,410,499.05 90,748,181.75 1,309,999,950.39 1,157,830,607.33

Deposits by States and Railroad Retirement Board in unemployment

trust fund 981,920,035.31 963,798,484.39 3,110,257,905.07 3,039,036,042.23

Veterans' life insurance funds 32,095,3E0.58 28,947,432.33 449,121,540.87 443,055,271.81

All other 1,352,714,694.13 946,740,067.89 10,654,793,992.30 9,922,027,681.40

Total 14,566,363,029.77 12,294,652,460.83 115,782,266,094.25 113,007,613,772.38

Deduct: Refunds of receipts 1,108,849,455.38 1,349,816,361.72 5,554,303,123.86 6,719,639,630.63

Net deposits 13,457,513,574.39 10,944,836,099.11 110,227,962,970.39 106,287,974,141.75

WITHDRAWALS

Defense Department:

Military (including military assistance) 4,185,843,097.54 4,146,630,528.01 44,176,500,295.45 46,107,725,953.73

Civil 109,244,129.65 82,547,768.92 1,151,486,479.50 1,084,339,839.79

Foreign assistance - economic 155,797,036.43 128,021,200.28 1,867,526,636.07 1,770,859,936.49

Atomic Energy Commission 164,220,261.07 210,536,635.79 2,410,425,558.31 2,511,896,870.25

National Aeronautics and Space Administration 418,197,597.38 358,609,747.58 4,594,156,182.02 3,678,896,156.37

Veterans Administration 450,269,714.30 425,577,316,50 5,056,823,269.06 4,902,960,811.70

Commodity Credit Corporation 109,505,819.17 105,737,708.73 4,281,778,162.84 5,230.162,387.09

Health, Education, and Welfare Department 607,551,312.05 188,567,541.18 5,020,774,044.23 4,879,894,818.30

Interest on the public debt 1,303,692,944.47 1,295,199.965.03 8,240,348,215.71 7,796,353,379.05

Federal employees' retirement funds 123,520,140.21 112,765,095.47 1,316,751,812.90 1,208,064,487.36

Federal old-age and disability insurance trust fund, 1,433,538,812.25 1,370,971,507.44 15,480,898,843.17 14,747,854,343.83

Highway trust fund 192,335,959.04 208,221,433.57 3,618,885,575.51 3,300,696,779.21

Railroad retirement account 94,839,490.'7'7 93,046,547.26 1,031,514,481.80 1,009,6.62,060.69

Unemployment trust fund 161,109,981.99 223,981,805.71 2,660,272,537.12 3,045,029,534.04

Veterans' life insurance funds 31,636,540.38 34,089,117.80 577,301,971.50 616,871,158.72

All other 2,267,765,964.72 1,086,337,951.33 13,555,995,729.77 12,252,678,857.98

Total withdrawals 11,809,069,371.42 10,070,841,870.60 115,041,439,795.01 114,143,896,374.60

Excess of deposits (+) or withdrawals (-) applicabletobudget, trust, and

other accounts, (For other deposits and withdrawal data, see Table II) 4,648,444,202.97 4873,994,228.51 -4,813,476,824.62 -7,855,922,232.85

See footnotes at end of table, p. 28.

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 
TABLE V--MEMORANDUM ON CERTAIN TRANSACTIONS IN PUBLIC DEBT ACCOUNTS

Classification This month

to date

Corresponding

month

last year 2

Fiscal year 1965 Corresponding

to date period fy 1964 2

(.8.n.ng WY 5 19.) (BegInnIng luiy I. 963) . 

1

Non-cash items included in public debt in Table III and omitted from

withdrawals in Table IV:

Increments on savings and retirement plan bonds 

Discount accrued on Treasury bills $127,455,256.84 $118,143,474.06 11:2:14:= 11,220,831,539.28 1,724,601,511.14

Total 127,455,256.84 118,143,474.06 3,256,894,341.60 2,945,433,050.42

Public debt redemptions included in withdrawals in Table IV:6

Interest included in savings and retirement plan bond redemptions 

Discount included in Treasury bill redemptions 

68,024,465.32

124,340,294.71

95,164,444.37

78,246,442.37 jg:274:72:N 775,183,580.05 1,456,369,560.96 Inter-American Development Bank notes (net) -25,000,000.00

International Monetary Fund notes (net) 200,000,000.00 2,000,000.00 472,000,000.00 -117,000,000.00

International Development Association notes (net) -16,391,200.00 -35,304,400.00

United Nations funds securities Inet) 3,000,000.00 527,433.00 -13,873,435.00 -42,061,834.00

Excess profits tax refund bonds 15.49 216.94 10,649.99 8,113.83

Armed forces leave bonds 65,575.00 59,700.00 528,850,00 607,450.00

Adjusted service bonds 12,950.50 7,300.00 127,900.00 123,050.00

Total 395,443,300.52 176,005,536.68 3,106,753,951.41 2,012,925,520.84

TABLE VI--U.S. SAVINGS BONDS--SERIES E AND H

Sales--cash issue price $347,253,600.05 1350,170,357.54 $4,168,357,764.93 $4,250,336,267.05

Accrued discount on Series E 1,247,689,988.03 1,205,856,704.59

Total 347,253,600.05 350,170,357.54 5,416,047,752.96 5,456,192,971.64

Redemptions--for cash, at current redemption value' 394,719,914.69 352,260,092.05 4,535,687,258.75 4,303,165,465.55

Exchanges--Series H for Series E, F and J 14,605,000.00 14,095,500.00 177,092,000.00 193,202,000.00

'Statutory reserve, 5% lawful money, for Board of Trustees, Postal 'Distribution in accordance with provisions of sec. 201 of Social

Savings System, is $17,800,000.00. Security Act, as amended, is shown in Monthly Treasury Statement.

2 Covers period through May 27, 1964. 6 Minus figures represent net issues. Armed forces leave bonds,

Includes exchanges. etc., and interest on savings bonds and Treasury bills are withdrawals

Statutory debt limit, established at $285 billion by the act approved when paid.

June 30, 1959, has been temporarily increased to $324 billion through 7 Reported as refunds of receipts.

June 30, 1965. ',Includes minor amounts Series A-D, which matured before May 1051.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, B. C. 20402 Subscription price $6.00 per year (domestic), $11.00 per year additional (foreign slatting), includes all issues of daily Treasury statements and

the Monthly Statement of Receipts and Expenditures of the U.S. Government. No single copies are sold.

V,76'

SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 29

CREATION OF ADDITIONAL INTERNATIONAL FINANCING AGENCIES

While we created the Export-Import Bank in 1934, a recent report

says it did not begin to function on its present scale until 1945. Then

what do we have in the way of international finance. Export-Import

Bank, Agency for International Development—that started out as

the Marshall plan—and the aura of that name lost some of its appeal,

and now we have changed its name. Now it is called AID.

The International Monetary Fund, International Bank, International Finance Corporation, International Development Association,

Inter-American Development Bank, Special Inter-American Fund

for Social Progress.

We have them all, don't we?

Mr. DEMING. Yes, sir.

Senator ROBERTSON. And they all primarily date back to a plan

we had in 1945 when we were going to try to develop a better world.

We were going to have a world that was dedicated to peaceful cooperation, and we were going to make out of our blessings due to a

system of private enterprise, funds available to develop themselves on

the assumption that, if they got a little richer, they would act a little

better—would be a little more friendly with each other and with us.

So when it came to the International Monetary Fund—and it was

a sound concept—we very generously agreed that our wealth and

production, being equal to one-fourth of the entire world, we said

we will handle one-fourth of this bill, and we have been handling it

ever since.

Mr. DEMING. Although our original share in the total Fund quotas

was more than 30 percent, our share for the total at present is about

26 percent.

Senator ROBERTSON. One-fourth. This bill has a fourth.

Mr. DEMING. That is correct, Senator. Our quota is to be increased

by one-fourth, which will leave our share in total fund quotas also

about 25 percent.

BORROWING POWER OF FOREIGN COUNTRIES THROUGH EXPORT-IMPORT BANK

Senator ROBERTSON. Then we gave the Export-Import Bank to help

people buy here and to help us sell abroad, mostly to export, we gave

them a borrowing power of $6 billion.

Senator ELLENDER. It is more than that now. I think it is in excess of $9 billion.

Senator ROBERTSON. The Export-Import Bank?

Senator ELLENDER. Yes.

Senator ROBERTSON. We changed it last year, but I forget the figure.

Senator ELLENDER. $9 billion. I remember it.

RELEASE OF DOLLARS IN EXCHANGE FOR GOLD SUPPLY DRAINAGE

Senator ROBERTSON. We have turned so many dollars loose in the

world on the theory that there was a dollar shortage, and if we made

dollars available, everybody could buy what they needed and they

would be prosperous as we would be prosperous.

It started to come back to us in a drain in our gold supply. The

Export-Import Bank made loans. The International Bank made
30 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

loans, and loans that were no good we handled under our foreign aid

program. That total, loan and gifts, amounts to how much since the

T "liked Nations Charter was ratified?

Mr. DEMING. I don't have that figure.

Senator ROBERTSON. Well over $110 billion and we are going to approve soon a continuation of it. Notwithstanding this serious balanceof-payments problems, the pending foreign aid program amounts to

almost as much as the entire expenses of our Government when I was

elected to Congress in 1932.

At that time we appropriated $4 billion. Now we are going to appropriate nearly $3.5 billion for foreign aid alone, and soon much more

than that.

This is all tied in. As I say, this was just a little too much of a problem for one of our subcommittees to handle. It is just a little too much

for me to say that $1 billion did not make too much of a difference,

more or less.

"Let us throw it in and not have any hearings or anything else." So I

respectfully say for your Chief to ask the full committee to hear it and

please come up and give us your justification. We won't ask any adverse witnesses to come, if any, because of course Congress approved

the general principle.

But we need to realize that this all ties into the general scope of a

better world and it has not quite worked out like we hoped it would.

I had planned to ask a few questions about what we do when a

nation does not pay, but I do not believe it is necessary—how much

drain this is going to be on our gold supply, one thing or another.

Eventually we have to go in full.

MORE TIMELY ADMINISTRATION FUTURE ACTION REQUESTED

Next time I hope the administration will start in time and not wait

until an immediate demand faces them. Send the administration bill

up here and let the chairman of this committee introduce it either as

his bill or by request, and then we will have full hearings on what is

involved.

That is all.

FUND ORIGINAL QUOTAS AND INCREASES OF ALL MEMBERS

• Senator ELLENDER. I wonder if we could have the witness put in the

record at this point the figures showing the gradual increase of this

fund. This is the third time, I think.

Mr. DEMING. This is the second time for a general quota increase.

It is in the report of the National Advisory Council, and it would be

• easy to put in the record.

(The information referred to appears on p. 6.)

Senator ELLENDER. Also put in the record contribution made by all

those who belong to it, particular)y our rich friends from Western

Europe. They are now in a better position than we were when this

thing started.

They have gone up, we have gone a little down, but I presume that the

percentage of contribution remains the same.
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 31

(The data referred to follows:)

Present International Monetary Fund quotas 2 and proposed quota increases

[In thousands of U.S. dollars]

Member country

Present

quotas I

Proposed

quota

increases

Total 16, 092,750 21,046, 000

Afghanistan 22, 500 29,000 Algeria 60,000 75,000 Argentina 280,000 350,000 Australia 400,000 500,000 Austria 75,000 2 175. 000 Belgium 337,500 422,000 Bolivia 22, 500 29,000 Brazil 280,000 350,000 Burma 30,000 38,000 Burundi 11,250 15,000 Cameroon 15,000 19,000 Canada 550,000 2 740,000 Central African Republic 7, 500 10,000 Ceylon 62,000 78, 000 Chad 7,500 10,000 Chile 100,000 125, 000 China 550,000 690,000 Colombia 100,000 125,000 Congo (Brazzaville) 7,500 10,000 Congo (Leopoldville) 45,000 57,000 Costa Rica 20,000 25,000 Cyprus 11,250 15,000 Dahomey 7,500 10,000 Denmark 130, 000 163, 000 Dominican Republic 25, 000 32,000 Ecuador 20, 000 25,000 El Salvador 20,000 25,000 Ethiopia 15,000 19,000 Finland 57,000 2 125, 000 France 787, 500 985,000 Gabon 7, 500 10,000 Germany, Federal Republic of 787, 500 2 1,200, 000 Ghana 55,000 69, 000 Greece 60,000 2 100, 000 Guatemala 20,000 25,000 Guinea 15,000 19,000 Haiti 11, 250 15,000 Honduras 15,000 19,000 Iceland 11,250 15,000 India 600, 000 750,000 Indonesia 165,000 207, 000 Iran 70,000 2 125, 000 Iraq 55,000 69, 000 Ireland 45,000 2 80, 000 Israel 50, 000 2 90,000 Italy 500, 000 625,000

Ivory Coast 15,000 19,000 Jamaica 20, 000 25,000 Japan 500, 000 2 725, 000 Jordan 11, 250 15,000 Kenya 25, 000 32,000 Korea 18, 750 24,000 Kuwait 50,000 63,000 Laos 7, 500 10,000 Lebanon 6, 750 9,000 Liberia 11,250 15,000 Libya 15,000 19,000 Luxembourg 15,000 19,000 Malagasy Republic 15,000 19,000 Malaysia 100,000 125.000 Mali 13,000 17, 000 Mauritania 7, 500 10,000 Mexico 180, 000 2 270, 000 Morocco 52, 500 66, 000 Nepal 7, 500 10, 000 Netherlands 412, 500 520, 000 New Zealand 125, 000 157, 000 Nicaragua 11,250 15, 000 Niger 7, 500 10, 000 Nigeria 50, 000 63, 000 Norway 100,000 2 150, 000 Pakistan 150, 000 188, 000

See footnotes at end of table, p. 32.
32 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

Present International Monetary Fund quotas 1 and proposed quota increases-Con.

[In thousands of U.S. dollars]

Member country

Present

quotas 1

Proposed

quota

increases

Panama 

Paraguay 

Peru 

Philippines 

Portugal 

Rwanda _ 

11,250

11, 250

37, 500

75,000

60, 000

11,250

2

15,000

15, 000

47, 000

110, 000

75, 000

15,000

Saudi Arabia 72, 000 90, 000

Senegal 25, 000 32, 000

Sierra Leone 11, 250 15,000

Somalia 11,250 15,000

South Africa_ 150,000 2 200, 000

Spain 150,000 2 250, 000

Sudan 45, 000 57, 000

Sweden_ 150, 000 2 225, 000

Syrian Arab Republic 30, 000 38, 000

Tanzania 25, 000 32, 000

Thailand 76, 000 95, 000

Togo 11,250 15,000

Trinidad and Tobago 20,000 25, 000

Tunisia 22, 500 29, 000

Turkey 86,000 108, 000

Uganda 25, 000 32,000

United Arab Republic 120,000 150,000

United Kingdom 1,950, 000 2,440, 000

United States 4,125, 000 5,160, 000

Upper Volta 7,500 10,000

Uruguay 30, 000 38, 000

Venezuela 150, 000 2 250, 000

Vietnam 22, 500 29, 000

Yugoslavia 120,000 150,000

1 As of Feb. 26, 1965.

2 Including special increases totaling 8870,000,000.

Source: International Monetary Fund.

SPECIAL REPORT ON FRANCE

Senator ROBERTSON. We also would like to have a special report on

modern France. Have they paid their World War I or World War

II debts, but are they hooking us for gold every time they turn around?

Mr. DEMING. I agree with you on World War I debts, but they have

prepaid their World War II debts.

Senator ROBERTSON. Just World War I.

Mr. DEMING. Yes.

Senator ROBERTSON. They still owe us money we loaned them on the

Marshall plan?

Mr. DEMING. They are current on those payments and have prepaid.

(The report referred to follows:)

The World War I indebtedness of the Government of France due and unpaid

as of June 30, 1964, was $4,497 million. Unmatured principal was $1,959

Insofar as French World War II and postwar debt is concerned, obligations

of the Government of France to the U.S. Government as of December 31, 1964,

included $178.6 million under the Export-Import Dank lend-lease termination

loan of 1945, $212.6 million on the lend-lease settlement of 1946, $201.5 million

on the surplus property settlement of 1946, and approximately $4 million on

loans made from the French franc counterpart of U.S. aid to France for the

development of basic material projects in Morocco, Algeria, and Mauritania. The

total obligation of the French Government (excluding World War I debts) was

thus approximately $597 million.

The French have been servicing debts incurred after World War II regularly

and have paid approximtaely $630 million in advance of the due dates.

French purchases of gold this year have been either the periodic type of adjustment of their reserve position which they made in both 1962 and 1963 or
SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966 33

purchases in keeping with their announcement in January of their intention to

convert further accumulations of dollars into gold on a regular basis. The

French have indicated that they intend to hold only the dollars which they

need for working balances and to cover their dollar-denominated debt. The

recent special purchases have reduced French dollar holdings—acquired by the

Bank of France from French residents who in turn obtained them in the course

of normal commercial transactions between France and the rest of the world—to

about $1 billion; $300 million to $400 million might be considered an adequate

working balance. The outstanding debt of the French Government in U.S.

dollars and to Canada (excluding World War I debts) is about $700 million.

GOLD QUOTA PAYMENT EFFECTUATION

Senator BARTLETT. Mr. Secretary, I am not quite clear on this gold.

Is there a physical transfer?

Mr. I)EmiNo. A physical transfer in this sense. The gold will be

put in the International Monetary Fund compartment at the Federal

Reserve Bank of New York.

Senator BARTLETT. The actual gold?

Mr. DEMING. The actual gold, so that it is physically transferred,

but it stays in the same building you might say.

Senator ELLENDER. But we do not have possession of it. It is just

like the rest that we lost in the last 7 or 8 years. It is all in the

hands of our rich friends from Western Europe.

Senator BARTLETT. There are several ways we can increase our supply of gold, of course.

Senator ROBERTSON. Let the Yukon pan us a little more.

I have no further questions.

Chairman HAYDEN. Thank you for your appearance.

Mr. DE1VIING. Thank you, sir.

JUSTIFICATION

Chairman HAYDEN. The justification will be placed in the record

at this point.

( The justification follows:)

"FUNDS APPROPRIATED TO THE PRESIDENT

"INTERNATIONAL MONETARY FUND

"Increase in Quota, International Monetary Fund

"To finance an increase in the quota of the United States in the International

Monetary Fund, $1,035,000,000 to be available from June 2, 1965, and to remain

available until expended."

INCREASE IN QUOTA; INTERNATIONAL MONETARY FUND

Program and financing

[In thousands of dollars]

1965

actual

1965

estimate

1965

estimate

Program by activities: Increase in quota in International

Monetary Fund 1, 035, 000 1, 035, 000

Financing: New obligational authority (appropriation) 1, 035, 000 1,035, 000

Relation of obligations to expenditures:

Total obligations (affecting expenditures) 1, 035, 000 1, 035, 000

Obligated balance, start of year 

Obligated balance, end of year —776,250 —776,250

Expenditures 258, 750 258,750
•

34 SUPPLEMENTAL HEARINGS TREASURY AND POST OFFICE, 1966

JUSTIFICATION

The Articles of Agreement of the International Monetary Fund were formulated at the Bretton Woods Conference in 1944. The Bretton Woods Agreements Act of 1945 (59 Stat. 512, as amended, 22 U.S.C. 286) authorized the

President to accept membership in the Fund. As of May 15, 1965, the Fund had

102 members with total quotas of almost $16 billion. The Fund provides mediumterm credit repayable in 3 to 5 years in convertible currencies or gold. It is a

mutual financing agency from which members may draw foreign currencies to

gain time for correcting their balance-of-payments situation without taking

measures adversely affecting other countries.

Since February 1964, the United States has drawn $600 million in foreign

currencies from the Fund. As of May 15, 1965, its net obligation to the Fund

amounts to about $330 million since other countries have drawn the difference

in dollars from the Fund during the same period. In earlier years, when the

U.S. balance-of-payments position was strong, foreign countries borrowed dollars

through the Fund in large volume. As foreign countries made net dollar repayments in the period 1957-63 the Fund absorbed more than $1 billion in dollars

from foreign countries, thus easing our international financing problems and

obviating calls on the U.S. gold stock.

The present U.S. quota in the Fund is $4,125 million, one-fourth of which the

United States has paid in gold. Section 7(a) of the Bretton Woods Agreements

Act (59 Stat. 514) provided for the payment of $1.8 billion of the U.S. original

subscription of $2,750 million from the fund established by section 10(c) of the

Gold Reserve Act of 1934 (48 Stat. 341, as amended, 31 U.S.C. 822(a) ). Section

7(b) of the Bretton Woods Agreements Act provided that the remainder of the

subscription, amounting to $950 million, be paid from the proceeds of securities

issued under the Second Liberty Bond Act, as amended, as a public debt transaction. A 50-percent increase in the U.S. quota amounting to $1,375 million was

authorized by the act of June 17, 1959 (73 Stat. 80, 22 U.S.C. 286e-1), which

also authorized payment of the subscription from the proceeds of public debt

transactions.

Authorizing legislation for this quota increase for which appropriation is

requested was passed by the House of Representatives on April 27, 1965, and

the Senate on May 24, 1965, thus completing congressional action. The increased U.S. subscription, amounting to $1,035 million, is part of a program

calling for a general increase of 25 percent for all members and larger increases

for 16 members; $259 million of our subscription will be paid in gold. In return

for this payment the United States will receive a substantially equivalent reserve asset in the form of "gold tranche" automatic drawing rights on the Fund.

The balance of $776 million will be committed in the form of a letter of credit

to the Fund. This will not be drawn upon in the foreseeable future—that is

until sometime after the U.S. balance-of-payments position has been corrected

and present Fund dollar holdings, amounting to more than $3 billion, have been

used.

COMMITTEE RECESS

Chairman HAYDEN. The witness will be excused so that the committee may proceed into executive session.

(Whereupon, at 11 a.m. Thursday, June 3, 1965, the committee recessed, to convene in executive session.)
INDEX

Page

Bretton Woods Agreements Act 20

Deming, Hon. Frederick L., statement of 1

Document, Senate 1

French war debt 32

International credit and financing operations, agencies engaged in 18

International financing agencies, creation of additional 29

International Monetary Fund:

Authorizing legislation of U.S. quota increase 2

Balance-of-payments implications 7

Defaults 6

English sterling stability, maintenance of 7

Foreign aid implications 4

Fund use by larger member countries 3

Gold drawing right 9

Letters of credit, use of 9

Maintenance gold value guarantee 7

Nature of International Monetary Fund 11

Percentage of increases to be paid in gold 4, 8

Quota increases 4, 6,8,15, 30

U.S. drawings 5,12

U.S. payments 5

U.S. position 13

U.S. quota 1,4

U.S. use to retain gold 5

Justifications 34

Under Secretary of the Treasury for Monetary Affairs, statement of 1

U.S. gold stock, reduction in 9, 16, 33

U.S. world financial image 16

World trade increases 3

A




Ne