893.51/4024
The American Group to the Secretary of State
[Received October 28.]
Sir: We are in receipt of your letter of October 21st, (FE–893.51/2992 [4019]),54 in which you are good enough to enclose to us copies first, of the memorandum filed by the Japanese Chargé d’Affaires, and, second, your telegram to Peking of October 17th in reference to a possible Crisp loan. As to the views expressed by the Japanese Government, we would venture the observation that while upon their face they appear somewhat disturbing as indicating a lack of sympathy in Consortium operations in the near future; at the same time, from the experience that we (and especially Mr. Lamont) have had with the Japanese Group, we feel that in case the Consortium as a whole is able in the near future to devise any sound loan operation to the present Chinese Government, adequately secured and in such shape that it can be properly offered to investors, then, and in such event, the Japanese Group will not be lacking in active cooperation and in doing its share. The Japanese Group in the deliberations of the Consortium has not infrequently taken a most conservative attitude but in the last analysis fairly exhibited its determination to work in harmony with the other groups and to take part in every possible constructive effort that they are making. The Japanese Government is not likely to take any opposing attitude.
As to the communication of October 17th to the Peking Legation touching upon the Crisp loan, the only information that we have had in this matter at all is contained in Mr. Hughes’ brief allusion in his letter of October 9th, (FE–893.51/3977a),54 so we shall be greatly obliged if we can be put in possession of any further information that you may have at hand.
It would appear to us, if you will allow us to say so, that your reply to the British Foreign Office,55 as quoted to the American Legation, Peking, recedes somewhat from the position hitherto adopted by the Department upon the measure and character of its support to the Consortium. We realize that the Department’s reply to the [Page 791] British Foreign Office in all probability had to do with the question of monopoly in its narrow sense. At the same time, it appears to us that the British Foreign Office might well gain an erroneous impression from the Department’s reply to it, as to the Department’s future intentions towards the American Group and towards the Consortium in general.
For instance, the Department uses the phrase, “the Consortium cannot at this time be said to be competing for such business.” It is not for us to attempt to define the word “competing”, but the fact remains that at the time this despatch was sent to Peking the American Group, with the other members of the Consortium, was, as the Department had been informed, in active discussion and negotiation with the Peking Government on the question of a refunding loan. These discussions were initiated by the Peking Cabinet, and clearly indicated its desire to recognize the Consortium and to treat with it. It therefore seems to us that due weight should have been given to these circumstances, and that by no possibility could the American Group or the Consortium at this time be considered as having even temporarily withdrawn from the situation, and as therefore giving justification to the Department to encourage negotiations of the Crisp character.
May we point out, therefore, that when by inference the Department gives its approval, or at least fails to withhold its approval from the so-called Crisp negotiations, it thereby tends to stultify greatly the very principles which the Consortium, with the approval of the Department and of the other Foreign Offices, has heretofore adopted in connection with Chinese loans. The record shows that the conviction of all concerned has been that such loans shall not be granted to the Chinese Government unless the purposes for which they are negotiated are clearly and satisfactorily set forth by the Chinese Government, and unless means are adopted to see to it that the proceeds of such loans are properly spent as designated. These principles, as you are aware, have been adopted for the purpose of preventing the squandering of public moneys on the scale heretofore resulting from ill-advised and ill-safeguarded foreign loans. These principles form the backbone of Consortium policy as approved by all the Governments; unless we adhere to them rigidly the Chinese Government will continue to be debauched. Therefore it would appear to us that even in a reply made in the limited sense indicated, it would be advisable to give to the British Foreign Office some indication that the Department in no event would look with approval upon an outside or independent loan to China which was lacking in the safeguards hitherto adopted and insisted upon by the Consortium and the Governments.
[Page 792]The Department is undoubtedly aware that in times of comparatively easy money, so-called banking concerns will offer their services to possible clients like the Chinese Government in the hope of doing some limited piece of business yielding large immediate profit, but abandoning most of the principles of sound finance. Such concerns, if objection is made to their course of procedure, always raise the outcry of Monopoly, et cetera. Such an outcry, however, in the United States, is little likely to be heard by reason of the fact that the American Group has encouraged every banking institution or banking house of standing, that has any real interest in Far Eastern affairs, to enter the American Group and take a share in its deliberations and operations.
As to the situation in Great Britain, however, matters are in somewhat different case, and we can imagine a real discouragement being felt by the British Group over any indication that the American Government had somewhat receded in its position of Consortium support. … We here feel that we are perfectly conversant with the attitude of the Department towards the American Group; we feel that when it comes to practical measures the American Group in the Consortium will be able to count upon the most cordial and complete support from the Department. We believe, however, that it would be well not to allow any erroneous impression to rest even for a moment in the minds of the British Foreign Office and British Group, and therefore we venture to hope that the Department may see fit to file with the British Foreign Office a brief supplementary memorandum somewhat amplifying its position.
We are all engaged in a very earnest effort to better conditions in the Far East, a cooperative effort that up to date has meant, on the part of the various national Groups involved, nothing but expenditure and sacrifice. If we are able to maintain close harmony among the groups, and close support among all the Governments, we shall in time, we believe, go far in accomplishing the result of stabilizing conditions in China and working out new economic and financial measures for her. We shall be able, in a real sense, to make practical some of the high principles embodied in the Four-Power Pact concerning the Pacific, adopted last year at Washington.
Because of our attitude in all this matter, of which the Department is well aware, we have not hesitated in this letter to go into the situation at considerable length.
Respectfully,
For the American Group