894.51 Or 4/2

Memorandum by the Economic Adviser of the Department of State (Young)52

Proposed statement to be made to representatives of the National City Company regarding the proposed loan of $20,000,000 to the Oriental Development Company.

The Department of State has given careful consideration to the proposal that bonds of the Oriental Development Company of Tokio should be floated in the United States for the purpose of financing development work in which this company is interested in regions outside of Japan, namely, in the South Sea Islands, Singapore, Straits Settlements, Manchuria and Mongolia.

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In other connections the attention of the Department has been drawn from time to time to instances in which the proceeds of foreign loans floated in the United States have been utilized in third countries with the effect of promoting the activities of competitors of American enterprises. It has been suggested that the employment of American funds in this manner is prejudicial to American enterprises that have invested their capital and are employing their energies in operations in foreign countries and that besides it tends to restrict opportunities for the further investment of American capital.

This Department could only regret the employment of funds derived from loans floated in the United States in such manner as to prejudice legitimate American enterprises in parts of the world other than the country which (or whose nationals) may borrow in the United States, and accordingly feels that it should scrutinize as carefully as possible loan projects laid before it that may present such a situation.

In view of the foregoing, and after careful consideration, the Department regrets that it is unable to view with favor the loan in question.

  1. Notation on margin: “Approved by the Sec. and read to Messrs. Ailes and Roberts of Riggs Bank, agents of Nat. City Co., Dec. 16, 3 p.m. by Mr. Mac-Murray and me. A. N. Y[oung].”