In the Nick of Time

For many a month, the World Bank had dangled over a precipice like a melodrama heroine. Last week, while financiers cheered lustily, the Bank was snatched from disaster's clutches. Its rescuer was no wavy-haired glamor boy, but John Jay McCloy, 51, a bald and chunky Manhattan corporation lawyer who had done a bang-up administrative job as Assistant Secretary of War.

Jack McCloy did not become a hero by the simple act of accepting the Bank's presidency (salary: $30,000 a year, tax-free). What made McCloy look good to businessmen was the efficient way he had gone about cleaning up the troubles of the Bank before he took over.

McCloy knew why Washington Publisher Eugene Meyer had quit as the Bank's president last December and why two other men had subsequently turned down the job (TIME, Dec. 16, et seq.) Under the rules, the Bank's president could be held responsible if the Bank's loans went bad. But the Bretton Woods charter did not give him nearly enough power to go with his heavy responsibilities. He took all his orders from the Bank's twelve full-time executive directors, one from each of twelve member nations.

In effect, this meant that the president, in spite of his high-sounding title, was actually under the thumb of the U.S. executive director, who, because of the huge U.S. investment in the Bank, controls the biggest bloc of votes on the board. And the U.S. executive director was bossy, ambitious Emilio Gabriel Collado, 36, longtime New Deal economist. Many bankers feared that Collado was likely to put too heavy an emphasis on the political instead of financial merits of loans.

Big Broom. Knowing this, McCloy refused the presidency when it was first offered to him in December. But he dished out a blunt appraisal of the Bank's faults. McCloy's bluntness won such favor that Secretary of the Treasury John Snyder offered him the job again--on his own terms.

McCloy accepted with the understanding that, no matter how the Bank was set up on paper, he would be boss in fact as well as in title. To play safe, he demanded --and got--the resignation of "Pete" Collado. (Washington gossiped that Collado would soon go to China to lend a hand in stabilizing the currency.)

To take Collado's place the Bank picked a McCloy man, Eugene R. Black, 48, lean, laconic vice president of Manhattan's big Chase National Bank, who has recently returned from a two-month study of European credits. (His appointment is the only one that must be confirmed by the Senate.)

To take the late Harold D. Smith's job as vice president of the Bank, new President McCloy picked Robert Livingston Garner, 52, financial vice president of General Foods Corp. Garner, an infantry captain in World War I and former treasurer of the Guaranty Trust Co. of New York, will advise McCloy on securities floatations. These two banking men eliminated any objection to McCloy on the grounds that he knew too little about banking for the job.

Calculated Risks. The new team, recruited from the private financing community, did wonders for the Bank's prestige, which had fallen dangerously low. Private bankers warmed still more at Jack McCloy's first discussion of the Bank's lending policies,.

"The Bank," said he, "is fundamentally sound and has an important job to do. The world cannot exist half rubble and half skyscraper. ... In making loans, it is impossible to eliminate political considerations entirely. It is the Bank's function to take calculated risks. But every possible step should be taken for the protection of its bonds. The securities of the Bank must be made prime, because in the long run its success is dependent upon the cooperation of the financial community."

This was the kind of talk Wall Streeters had long wanted to hear. Now, after five months of inaction, the World Bank could finally get down to the business of reconstruction throughout the world. There are already requests for eight loans totaling $2.3 billion. One or two of them, said Jack McCloy, were "pretty far along." They might be made out of the Bank's subscription capital.

The issuance of securities, which would finance the bulk of future loans, was still a relatively long way off. But McCloy was already busy on the practical task of selling them. Even before he publicly took over, a bill was all set to be introduced in the New York State legislature making the Bank's bonds legal investments for New York State insurance firms. As insurance firms "domiciled" in New York own 50% of all U.S. insurance assets, this would open the door, when & if the bill is passed, to one of the biggest groups of bond buyers.

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