Foreign Relations of the United States Diplomatic Papers, 1935, The Far East, Volume III

893.515/674

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

[Washington,] July 9, 1935.

Conversation:	The Secretary of the Treasury, Mr. Henry Morgenthau, Jr.;
	Mr. Herman Oliphant;7
	Mr. Hornbeck.

Mr. Morgenthau showed me a letter from Sir Josiah Stamp⁸ in which Stamp stated that Sir Leith-Ross was proceeding to China via Canada; in Canada he would stop over a week end with a cousin at Toronto; and would Mr. Morgenthau care to take advantage of this fact in order to discuss with Leith-Ross the question of stabilization which Stamp and Morgenthau had discussed when Stamp called here in May. There were certain paragraphs in the letter over which Mr. Morgenthau was very much displeased. He said that he had shown the letter to the President who was equally and even more displeased. He said that he and the President were definitely and conclusively opposed to this Government making any approach to the British by way of inviting conversation with Leith-Ross. He had drafted a reply to Stamp, and he wished that I would give them the benefit of any ideas that I might have for giving the draft a completely diplomatic quality.

I read the draft and made the comment that, as a reply to Stamp’s letter, and dealing exclusively with the question of proposed conversation between Ross and Mr. Morgenthau, the draft seemed to me satisfactory; I might perhaps suggest for consideration a few verbal changes; but that the letter took no account of the fact that the Secretary of State was favorable to the idea of our having some kind of a contact with Ross and being in a position to draw Ross out on the subject of the British Government’s ideas in relation to the question of financial attachés to the Missions in China and also with regard to the British Government’s views on the China situation in general. Mr. Morgenthau said again that the President and he were opposed to our making any kind of a gesture of invitation to Ross.

I said that it was evident that the British Government would like to have Ross talk with us; that Mr. Morgenthau had said earlier in the conversation that we would be willing to receive Ross if the British Government would say to us directly that they wished to send him here and would do the whole thing above board; that this made the situation one in which each Government would be willing that there be a conversation, in which the China matter would probably be the chief subject, but that neither Government was willing to say to the other that it wanted to have such a conversation. Mr. Morgenthau repeated that the President and he were opposed to our giving any kind of an invitation to Ross or doing anything other than being receptive to a request from the British Government on his behalf.

It was then agreed that Mr. Oliphant and I should take the draft and I should give Mr. Oliphant my ideas of changes of phraseology.

I said to Mr. Morgenthau that I had with me and had been asked by the Secretary to hand to him a copy of a memorandum which the Secretary contemplated giving the President; I explained the subject matter and handed Mr. Morgenthau a copy of the long memorandum prepared in EA.⁹ Mr. Morgenthau said that he would take it home for his reading this evening. I next said that I had seen last night for the first time the tentative draft of a letter which Mr. Morgenthau had considered giving to the Secretary of State (which I exhibited) and that immediately upon reading it I had felt that it contained confirmation of an impression which I had long entertained that there was a difference in the concepts of the Secretary of the Treasury and the Secretary of State, respectively, with regard to the matter in hand and the procedures which had been and were under discussion; and that I had dictated partly for clarification of my own thought a memorandum of comment on that point and then a few paragraphs of comment on the question which the Treasury Department had formulated for possible submission to the British Government; that I had shown these memoranda of comment to the Secretary of State with the proposal that I give them to Mr. Morgenthau as a part of an oral statement on my part in at attempt to lead toward getting this matter into the same perspective in the eyes of the two Departments; that the Secretary had tacitly approved my doing this; and that, if Mr. Morgenthau was agreeable, I would like to leave with him this paper¹⁰ for whatever value it might have, as an entirely informal and unofficial bit of comment. Mr. Morgenthau said that he welcomed my giving him this item. (Note: Throughout the conversation Mr. Morgenthau was decidedly “agreeable”.)

Mr. Oliphant and I withdrew and proceeded to work out some amendments to the draft of Mr. Morgenthau’s letter to Stamp. I then took opportunity to make to Mr. Oliphant a number of observations in regard to difficulties on the one hand of procedure in the efforts of the American and British Governments to work together, and difficulties in the efforts of the State Department and the Treasury to work together; and I reiterated the point that the State Department feels it entirely desirable, in regard to Far Eastern matters, that the British and American Governments cooperate or proceed on parallel lines wherever and whenever possible; that we feel it advantageous to be responsive to suggestions which the British Government makes, when possible; that in the present instance the Secretary of State feels strongly that it would be to our advantage to find out all that we can from Sir Leith-Ross and probably to our advantage to appoint a financial attaché to our Mission in China; that the letter which the Treasury had drafted would put an end to the possibility of any conversation with Leith-Ross and, if sent, would amount to leaving entirely out of consideration the fact that here was afforded an opportunity for us to make such a contact; that there were several ways in which a conversation with Ross could be arranged, and that it would seem too bad that the State Department should not be enabled to do anything toward that end. I said that I wished Mr. Oliphant would review those points in conversation with Mr. Morgenthau. Mr. Oliphant said that he would do so.

Mr. Oliphant volunteered to give me a copy of the draft as it stood to bring to the Secretary of State.

The draft is here attached.¹¹

S[tanley] K. H[ornbeck]

7. General Counsel of the Treasury.
8. Director of the Bank of England.
9. Not printed; the memorandum, dated June 27, entitled “The Interweaving of Political, Economic, and Monetary Elements in the Present Position in China,” was prepared by Dr. Herbert Feis, Economic Adviser; it was handed to President Roosevelt by the Secretary of State July 10 (893.515/672).
10. Infra.
11. Not printed.