ECONOMIC POLICY COUNCIL MINUTES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01117R000602200004-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: June 23, 2011
• Sequence Number: 4
• Publication Date: May 2, 1986
• Content Type: MEMO

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EXECUTIVE SECRETARIAT
ROUTING SLIP
3637 (10.81)
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THE WHITE HOUSE
WASHINGTON
CABINET AFFAIRS STAFFING MEMORANDU
. Date: _ 5/2/86 Number:. 317, 103 Due By:
Subject:
Economic Policy Council Minutes
April 14. 1986 Meting
Action
ALL CABINET MEMBERS ^
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Chief of Staff
OMB
UN
USTR
^ ^
^ ^
EPA
GSA
NASA
OPM
SBA
VA
REMARKS:
RETURN TO:
Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Don Clarey
^ Rick Davis
^ Ed Stucky
Associate Director
Office of Cabinet Affairs
456-2800 (Room 235, OEOB)
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CEA
Q
OSTP
Poindexter
Svahn
Chew (For WH Staffing)
Executive Secretary for:
DPC
EPC
Attached for your information are the minutes of
the April 14 Economic Policy Council Meeting.
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MINUTES
ECONOMIC POLICY COUNCIL
April 14, 1986
1:00 P.M.
Roosevelt Room
Attendees: Messrs. Baker, Lyng, Yeutter, Sprinkel, Darman
Whitehead, Kingon, McAllister, Ball, Brashear,
Danzansky, Driggs, Gould, Gibson, Khedouri,
McMinn, Muris, Smart, Stucky, Wallis, and Woods.
1. Canadian Trade
Ambassador Yeutter explained that the original purpose of the
meeting was to consider an Administration position with regards
to the Canadian delay in introducing legislation correcting
problems in pharmaceutical trade. He noted however that the
Senate Finance Committee had indicated on April 11 its probable
intent to disapprove authority for,the Administration to
negotiate on a fast track a free trade arrangement with Canada.
He stated that the Canadians have responded by placing the
pharmaceutical bill on hold.
Ambassador Yeutter explained that several representatives of the
Canadian Government stated that if the Senate Finance Committee
rejects the President's request for fast track negotiating
authority, the Canadians are not willing to continue negotiations
on a slow track. He noted that the Finance Committee will have
to vote by April 23.
Ambassador Yeutter explained that several of the Senators
expressing opposition to the fast track negotiating authority
were concerned with particular issues relating to Canada,
including timber, hogs, and potatoes. He noted that Senator
Danforth is particularly interested in gaining Administration
support for a trade bill.
The Council discussed the importance of the free trade
arrangement for the United States. Mr. Wallis pointed out that
the ramifications of Senate disapproval would extend beyond
economic interests with Canada to also affect defense and
security relations. He noted that Senate disapproval would also
weaken the President's Economic Summit efforts to strengthen
support for expanding free trade worldwide.
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rnNFIBENT1L
Minutes
Economic Policy Council
April 14, 1986
Page Two
Secretary Baker stated that the tactics the Administration might
use to turn around the Senate Finance Committee is a White House
decision and should be made by the White House Legislative
Strategy Group.
2. Thrifts
Undersecretary Gould stated that on February 27, 1986, the
Economic-Policy Council.:approved- a series of principles for
addressing the problems of the thrift industry. He pointed out
that these principles included: strengthening the industry
through greater capital requirements and incentives; channeling
more funds to the Federal Savings and Loan Insurance Corporation
(FSLIC); and expanding the acquisition program for thrifts.
Mr. Gould stated that in developing a specific proposal for
channeling funds to the FSLIC, the Working Group balanced several
considerations, including: sharing the burden between thrifts and
the Federal Home Loan Bank System; avoiding a negative budget
effect; providing $15-25 billion over five years; avoiding a U.S.
Government guarantee; and accommodating the FHLBanks' concern
about maintaining their credit status.
He stated that the Working Group had developed the following
proposal for recapitalizing FSLIC:
o The FHLBB charters a "FSLIC Financing Facility" (FFF),
- capitalized with about $3 billion of the FHLBanks' surplus
over six years.
o The FFF borrows approximately $10 billion through long-term
bonds. It assures payment of these bonds' principal by
buying $2 billion of Treasury zero-coupon bonds.
o The FFF then invest the $10 billion of bond proceeds in
non-voting capital stock of FSLIC.
o FSLIC employs some of its assessment income to pay dividends
to the FFF, which uses this money to service its bonds.
o FSLIC would repay the $3 billion FHLBanks investment, and if
FSLIC is in good financial condition, it could pay up to a 6
percent return on the investment.
^^^!FioENnai
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^^?-1nENTlAI
Minutes
Economic Policy Council
April 14, 1986
Page Three
Mr. Gould explained that under this proposal it would be possible
to phase out the special assessment now imposed on thrifts, which
would help gain the support of the thrift industry. He also
noted that the FHLBB supports the general thrust of the proposal.
He stated that the proposal possesses some flexibility in the
amount of funds raised for FSLIC. He pointed out that the
proposal does not require any taxpayer assistance.
Dr. Sprinkel expressed his support for the proposal but
questioned whether the FFF investment in FSLIC would require
budget authority. He noted that if so, it would be more
efficient for the Treasury to borrow the necessary funds and
distribute them to FSLIC.
Mr. Muris stated that both the 0MB and the CBO would consider the
infusion of capital from FFF to FSLIC as borrowing, not equity,
and would thus not be counted as offsetting receipts. He
explained that if not counted as offsetting receipts, the budget
deficit would be increased.
Mr. Gould explained that the Working Group had been operating
under the presumption that the FFF investment in FSLIC would be
considered equity. He expressed some dismay that if the Working
Group were forced to start over, the Administration would lose
its influence on the question of how to strengthen FSLIC.
Secretary Baker pointed out that OMB Director Miller had
requested that the FFF infusion be equity, and noted that the
Working Group had gone beyond the original proposal to make the
infusion more equity-like by making it common stock. He stated
that if there were any suggestions on how to make the investment
more equity-like, the Council would welcome considering them.
He suggested that to ensure the FFF investment not increase the
deficit, the legislative proposal should specify that the
investment be counted as offsetting receipts.
Decision
The Economic Policy Council approved the proposed Working Group
plan for recapitalizing FSLIC. The Council agreed that to ensure
the FFF investment was considered equity and that the budget
deficit was not increased, the legislative proposal should
specify that the investment would be counted as offsetting
receipts.
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