The President's Partnership

Caravans of Cadillacs glided up to the East Wing of the White House last week and disgorged the biggest businessmen in the U.S. While many of the nation's board rooms stood deserted, the tycoons assembled to see the most important chief executive officer of them all. U.S. Steel's Roger Blough and General Motors' Frederic Donner were there; so were Du Font's Lammot Copeland, IBM's Thomas Watson, General Electric's Fred Borch--and 330 other chiefs of banks and corporations. Lyndon Johnson had invited them to a 90-minute session behind closed doors in order to sell them his "voluntary" plan for ending the nation's seven straight years of international payments deficits. There had never before been a gathering quite like it.

Blending corn with cajolery, the President urged them to "join hands with your Government in a voluntary partnership." Appealing to their "progressive enlightened self-interest," he urged them to make "tougher" decisions to "postpone, to redirect or to refinance activities in the developed world." Said the President: "I want you to go back to your offices and call to your desk your financial men and your economists and your comptrollers and your vice presidents, and I would hope that you would ask them in a reasonable way to consult with you every time they face a decision that involves spending money abroad."

Skeptics. Where to cut foreign spending--and by how much? The President did not answer those questions either in his White House presentation or in a speech that he gave the previous day to a meeting of the National Industrial Conference Board; he left the hard details to his subalterns. Federal Reserve Chairman William McChesney Martin took the bankers into a separate meeting, where they were advised that their foreign loans, which last year jumped 25% to $10 billion, should rise no more than 5% this year. Meanwhile, the corporate chiefs went to a session with Commerce Secretary John Connor, were told that each company would be expected to improve its own balance of payments by 15% to 20%--either by expanding its exports, bringing back more of its foreign profits or cutting its foreign spending. Connor expects the businessmen to inform him well in advance of any foreign investments of $10 million or more, and to report to him personally every three months what they are doing to improve their payments balances. He also urged businessmen to patronize U.S.-flag airlines and shipping lines instead of their foreign competitors, and to raise money for overseas branches by selling stock to foreign citizens.

Precisely because the program is vague and voluntary, its success will depend primarily upon how businessmen react to it. Such industrialists as G.M.'s Donner and RCA's David Sarnoff pointed out that their companies already have favorable trade balances, thus implying that the President could expect little more from them. A number of bankers echoed the criticism made by European financial leaders that Johnson had attacked the symptoms rather than the basic causes of the deficit. They pointed out that, in a rush to beat the voluntary controls, U.S. banks have probably already exceeded 1965's proposed limit of $500 million in new foreign loans. Other businessmen viewed the investment restrictions as barriers to the worldwide movement toward freer trade and freer exchange of capital.

Supporters. The majority of business leaders, however, seemed to believe that they could live with the program. "There is a good chance that the approach will work reasonably well," said the monthly letter of the Morgan Guaranty Trust Co. Henry Ford II announced that his company will finance all of its expansion in Europe and Canada "through funds generated outside the U.S." Faced with the prospect of mandatory controls if this program fails, most U.S. businessmen abroad will probably borrow more from foreign bankers and transfer more of their foreign profits to the U.S. That will make for costlier operations and slower expansion overseas. It will also, by Government reckoning, cut the U.S. payments deficit from $3 billion last year to well under $2 billion this year--and to $500 million soon after.

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