893.51/6129
Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With Mr. Thomas W. Lamont of New York
Reference, FE27 memorandum of March 26, subject: “China Consortium, Hukuang Bonds, Divergence of View between British and American Groups, and Questions of Major Policy”, and Mr. Phillip’s memorandum to Mr. Hornbeck of March 30.28
I talked with Mr. Lamont on the telephone yesterday morning, and, being in New York last evening, I had a few minutes’ conversation with Mr. Lamont.
In the course of these conversations Mr. Lamont and I were in agreement that the American Group in the Consortium and the American holders of Hukuang bonds have warrant for dissatisfaction with the manner in which British interests and the Chinese Government have been proceeding in regard to the matter of the Hukuang bonds. Mr. Lamont said that if the British bondholders accept the proposal which the Chinese Government has made, the American interests will probably have no alternative but to accept the same terms. He read to me a cable from Morgan, Grenfell and Company, London, which, together with copies of previous correspondence which he has sent us, shows that since some time in January the American Group has [Page 474] been given more or less information, from Chinese and from British sources, with regard to developments in this matter. This correspondence also shows that the British interests and the American interests are now conferring with regard to the matter. Mr. Lamont also showed me a copy of a telegram which he had prepared but not yet sent, to London, indicating the views of the American issuing and Consortium groups regarding the Hukuang bonds.
In the course of the first conversation, I took the opportunity to say to Mr. Lamont that, in view of information which we had received from London indicating that there was some threat of a possible breakup of the Consortium, the question of this Government’s attitude had been canvassed and I was authorized to say that we were not indifferent and that we would in fact view with regret a break-up of the Consortium. In the course of the evening conversation, I said that, the political situation in the Far East being what it is, and various problems of cooperation being what they are, it would seem to us that a break-up of the Consortium at this time might have unfortunate implications and occasion unsatisfactory inferences. Mr. Lamont indicated that he was of the same view. He said however that various of the American banks were skeptical if not indifferent with regard to Far Eastern possibilities and impatient of the expense which was involved in the American membership in the Consortium with, over a period of many years, none but negative effects, and that, with the irritation over the way the Hukuang matter is being handled, there would be an inclination on the part of some of them to advise letting the Consortium go to the board. He said that if the Government felt that it was worth while to have the Consortium continue, he wondered whether the Government would be willing in connection with the current developments to give a little assistance on behalf of the American Group. He was proposing to London some changes to be considered for proposal to the Chinese Government in that Government’s offer. He said that all concerned felt that it would be better to have a new arrangement with regard to the bonds than to have no new arrangement; but, the American Group felt that the Hukuang bonds were entitled to better terms than the Tientsin–Pukow bonds. He thought it would be very helpful if the State Department would instruct Ambassador Johnson to give support to the suggestion, if and when made by the groups on behalf of the bondholders, in that sense. He wanted to ask me to give consideration to that idea. I said that it sounded to me reasonable in principle but that I could not say just how far the Department might be willing to go: I would report the suggestion to the Secretary.
Mr. Lamont said that the British Bondholders Committee had inquired whether the American Group would have any objection to their conferring with Mr. Keuben Clark of the Foreign Bondholders Protective [Page 475] Council, Incorporated, and that reply had been made that the American interests would have no objection. I asked Mr. Lamont whether this meant that the American interests merely would make no objection or that they felt no objection. Mr. Lamont replied that they were perfectly willing to have that procedure followed. I inquired what effect that might have in regard to use of channels of communication. Mr. Lamont replied that he had not thought about that. He said that he did not know whether Mr. Clark would be willing to take on this task, but that he and his associates saw no reason for replying otherwise than affirmatively to the British inquiry. I remarked that we had received a telegram in which it was stated that the British interests intended to confer with Mr. Clark.
Mr. Lamont gave me copies of papers, which are here attached.29