BRETTON WOODS AGREEMENTS ACT AMENDMENT HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY HOUSE OF REPRESENTATIVES EIGHTY-SEVENTH CONGRESS SECOND SESSION ON H.R. 10162 A BILL TO AMEND THE BRETTON WOODS AGREEMENTS ACT, TO AUTHORIZE THE UNITED STATES TO PARTICIPATE IN LOANS TO THE INTERNATIONAL MONETARY FUND TO STRENGTHEN THE INTERNATIONAL MONETARY SYSTEM FEBRUARY 27 AND 28, 1962 Printed for the use of the Committee on Banking and Currency U.S. GOVERNMENT PRINTING OFFICE 808070 WASHINGTON : 1962 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis COMMITTEE ON BANKING AND CURRENCY BRENT SPENCE, Kentucky, Chairman WRIGHT PATMAN, Texas CLARENCE E. KILBURN, New York ALBERT RAINS, Alabama GORDON L. MCDONOUGH, California ABRAHAM J. MULTER, New York WILLIAM B. WIDNALL, New Jersey HUGH J. ADDONIZIO, New Jersey EUGENE SILER, Kentucky WILLIAM A. BARRETT, Pennsylvania PAUL A. FINO, New York LEONOR K. SULLIVAN, Missouri FLORENCE P. DW YER, New Jersey HENRY S. REUSS, Wisconsin EDW ARD J. DERWINSK1, Illinois THOMAS L. ASHLEY, Ohio SEYMOUR BALPERN, New York CHARLES A. VANIK, Ohio. JAMES HARVEY, Michigan WILLIAM S. MOORHEAD, Pennsylvania TOM V. MOOREHEAD, Ohio CLEM MILLER, California JOHN H. ROUSSELOT, California EDWARD R. FINNEGAN, Illinois W ILLIAM W. SCRANTON, Pennsylvania ROBERT G. STEPHENS, Jr., Georgia FERNAND J. ST. GERMAIN, Rhode Island HUGH L. CAREY, New York HENRY B. GONZALEZ, Texas HAROLD M. RYAN, Michigan T hom as A. K e n n e d t , Clerk and General Counsel Joh n E. B a r e ie r e , Majority Staff Member Or m a n S. F in k , Minority Staff Member R o b e r t R.; P oston, Counsel n Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CONTENTS H.R. 10162, a bill to amend the Bretton Woods Agreements Act to author­ ize the United States to participate in loans to the International Mone- tary Fund to strengthen the international monetary system.................... 1 Special report of the National Advisory Council, committee print.............. 3 Statement of— Champion, George, chairtnan, the Chase Manhattan Bank. New York, N.Y.................. ............................. ............................................ 161 Dillon, Hon. Douglas, Secretary of the Treasury.................................. 33 v'Martin, William McChesney, Jr., Chairman, Board of Governors of the Federal Reserve System........................... .................. ....... ......... 89 Patman, Hon. Wright, a Representative in the Congress of the United States from the State of Texas.............................................................. 39 Ruttenberg, Stanley H., director of research, American Federation of Labor & Congress of Industrial Organizations.................................. 136 Additional data submitted to the committee by— . Federal Reserve System: Documents relating to foreign-exchange operations: Memorandum, Paper No. 6........................................ ............... 143 Legal authority for Federal Reserve foreign exchange opera­ tions.-.................................................................... - ................. 155 Letter of Robert H. Knight, General Counsel of the Treasury, dated January 8, 1962.......................................................... - 156 Letter of William McC. Martin, Jr., Chairman, Board of Governors, dated February 16, 1962.................................... 158 Action by the National Advisory Council, dated February 28, 1962...................... ....................... ............... ......... - ............... - 160 Time deposits at all commercial banks.................... ............... ....... 134 U.S. drawing rights on the International Monetary Fund-......... 131 Patman, Hon. Wright: Letter to Hon. Douglas Dillon, Secretary of the Treasury, dated February 28, 1962, and reply dated March 5, 1962................ 56, 57 Letter from President John F. Kennedy to Hon. Sam Rayburn, dated March 14, 1961_________ _______ __________ _____ _____ I25 Attachment to the President’s letter, addressed to the President of the Senate and to the Speaker of the House, dated March 8, 1961, and draft of bill from Douglas Dillon, Secretary of the Treasury..... ................................... ............. ................................. 125,126 . Letter to Hon. William McC. Martin, Jr., Chairman, Board of Governors of the Federal Reserve System, dated February 28, 1962, and reply dated March 13, 1962--------------- - r -------------- 95,96 U.S. balance of payments and gold outflow from United States, House Document No. 84, 87th Congress, 1st session-------------- 113 Rousselot, Hon. John H.: Letter to Hon. Douglas Dillon, Secretary of the Treasury, dated February 23, 1962,_________________________________ _____ 72 Responses to questions submitted by Mr. Rousselot ------------------ 73 Scranton, Hon. William W.: Annual gold review___________________________________________ 76 Estimated gold production in 1961 (table)------------------------- 77 Estimated gold supplies and uses (chart)---------------------- - ** Changes in official gold stocks, October 1960-Sept ember 1961 (table)............................................... ..............- ......... - £9 Official gold stocks (chart)________________________________ gJJ 1958-61 decline in U.S. gold stock (table)-------------------------- International liquidity (chart)-------- --------------------------------- .'“ Monetary Policy in a Competitive World,” excerpt from re­ marks of Alfred Hayes, president, Federal Reserve Bank of Np\V Vrtrlr ____________ ni Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CONTENTS Additional information—Continued Spence, Hon. Brent: National Foreign Trade Council,. Inc., New York, N.Y., letter of Page WilliajnVS. Sw ingle, president, dated February 27, 1962---------- 164 sasirty^Department: -'Efalance^f-payments deficit results partly from outflow of gold from the United States----- ------------------------------------------------- - 70 Foreign deposits in the United States and U.S. deposits in for­ eign countries----------------------- - ---------------. .............................. 61 Permissible draw ing limits by less developed countries from the Fund--------------------- '------- ------------------------------- ----------------- - 56 Section III— Preliminary details by countries________ ______ 62 Table 1.— Short-term banking liabilities to foreigners as of December 31, 1961___________________________________ _ 62 Table 2.— Short-term banking claims of foreigners as of De­ cember 31, 1961__ 1_______ ___________________________ _ 64 Section IV— Supplementary data by countries_________________ 66 Table 1.— Short-term liabilities to and claims on foreigners reported by nonfinancial concerns___________ - ___________ 66 Widnall, Hon. William B.: “ I. T. & T phone company seized by Brazilian State,” article from the Washington Post, dated February 17, 1962_________ _____ 50 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis BRETTON WOODS AGREEMENTS ACT AMENDiMENT TUESDAY, FEBRUARY 27, 1962 H o u s e o f R epresentatives , C o m m i t t e e o x B a n k i n g a n d C u r r e n c y , Washington, D.C. The committee met at 10 a.m., Hon. Brent Spence (chairman of the committee) presiding. Present: Messrs. Spence (presiding), Patman, Rains, Multer, Ad- donizio, Barrett, Mrs. Sullivan, Reuss, Ashley, Vanik, Moorhead of Pennsylvania, Miller, Finnegan. Stephens, St. Germain, Carey, Gon­ zalez, ICilburn, McDonough, Widnall, Siler, Fino, Mrs. Dwyer, Messrs. Derwinski, Halpem, Harvey, Moorehead of Ohio, Rousselot, and Scranton. Mr. S p e n c e . The committee will come to order. We are honored this morning to have the Secretary of the Treasury to testify on H.R. 10162. (H.R. 10162 and committee print, Special Report of the National Advisory Council, are as follows:) [H.R. 10162, 87th Cong., 2d sess.] A BILL To amend the Bretton Woods Agreements Act to authorize the United States to partic’pate in loans to the International Monetary Fund to strengthen the international monetary system Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Bretton Woods Agreements Act, as amended (22 U.S.C. 286-286k-l), is amended by adding at the end thereof the following new sections: “Sec. 17 (a) In order to carry out the purposes of the decision of January 5, 1962, of the Executive Directors of the International Monetary Fund, the Secretary of the Treasury is authorized to make loans, not to exceed $2,000,- 000,000 outstanding at any one time, to the Fund under article VII, section 2(i), of the Articles of Agreement of the Fund. Any loan under the authority granted in this subsection shall be made with due regard to the present and prospective balance of payments and reserve position of the United States. “ (b) For the purpose of making loans to the International Monetary Fund pursuant to this section, there is hereby authorized to be appropriated $2,000,- 000,000, to remain available until expended to meet calls by the International Monetary Fund. Any payments made to the United States by the International Monetary Fund as a repayment on account of the principal of a loan ma^e under this section shall continue to be available for loans to the International Monetary Fund. “ (c) Payments of interest and charges to the United States on account of any loan to the International Monetary Fund shall be covered into the Treasury as miscellaneous