Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck)

Conversation: Mr. Morgenthau, Secretary of the Treasury;
Mr. Coolidge, Under Secretary of the Treasury;
Mr. Oliphant, General Counsel of the Treasury;
Professor J. L. Buck;
Mr. Hornbeck;
Mr. Mackay.43

(Note: This conversation was held in the office of the Secretary of the Treasury, at that Secretary’s request.)

Mr. Hornbeck stated that the Under Secretary of State was on his way to this meeting but that he had been called to the White House and would be delayed.

Mr. Morgenthau asked what the Department of State had to propose. Mr. Hornbeck said that so far as he knew the subject to be discussed had not been specified to us, but that we supposed that it was the matter of the Chinese Legation’s notes of February 5; we would like to hear what the Treasury thought. Mr. Morgenthau said that the Treasury had some views but that they had been brushed aside; he would like to hear the views of the Department of State.

[Page 536]

Mr. Hornbeck, then, after giving a brief account of the projects put forward and the action taken during the past four decades with regard to currency reform in China and the association of the United States Government therewith, made known the views of the Department of State with regard to the outline of a plan submitted by the Chinese Government in the notes of February 5. Mr. Hornbeck then read aloud the text of a proposed reply44 to the Chinese Minister’s two notes of February 5, 1935, which notes conveyed to the Department the aforementioned plan of the Chinese Government.

Mr. Hornbeck added that there was one question that might well be asked: Could the American Government participate in such a cooperative action for making a loan to China—without resort to Congress. Mr. Morgenthau indicated that Mr. Oliphant would look into that question.

Mr. Morgenthau, in substance, replied that he thought this would “get us nowhere”; that, in his opinion, the matter should not be dealt with by joint international action; that it is “a purely monetary matter” and should be handled “aggressively” by the Treasury Department; that we should invite Mr. T. V. Soong to come to the United States to discuss (with Morgenthau) the situation; but that the Department of State holds views to the contrary, in consequence of which he (Mr. Morgenthau) would inform that Department of his approval of the proposed reply to the Chinese Government and that in so doing he would, as in a previous instance, also state his belief that the suggestions thus made “would not get us anywhere”.

In reply to a question, Mr. Hornbeck stated that, in addition to monetary considerations, there are inherent in the problem very definite political factors which should not be overlooked and that, in his opinion, Japan would oppose by various means any attempts by the United States, or by any other country, to effect, individually and without Japanese participation, substantial loans to China or a rehabilitation of that country.

Following a brief discussion in regard to the possible sources of a possible international loan to China, in the course of which Mr. Hornbeck stated his opinion that, in this instance, funds for such a loan would have to be provided by the interested governments rather than by the China Consortium,45 Mr. Morgenthau stated his opinion that “we ought to go it alone”; that he could handle the matter—as he had—successfully—handled several other similar matters; but that, as the Treasury and State Departments are “at opposite poles” on the [Page 537]question of procedure, there seemed little use in discussing the matter further.

Mr. Hornbeck left with Mr. Morgenthau and with Mr. Coolidge, for further consideration, copies of the proposed reply to the Chinese Minister’s notes of February 5.

S[tanley] K. H[ornbeck]
  1. Raymond C. Mackay, of the Division of Far Eastern Affairs.
  2. See p. 539.
  3. For text of the China Consortium Agreement of October 15, 1920, see Foreign Relations, 1920, vol. i, p. 576.