893.51/6274
Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck)
Mr. Lamont called me on the telephone from New York. He referred to a letter of a few weeks ago (October 9, 1936)52 in which he had informed me of views imparted to him by Sir Charles Addis53 with regard to a proposed rescinding of a resolution relating to the China Consortium Agreement which provides that when loans are made to the Chinese Government that Government shall be free to make purchases with the proceeds in the open market. Mr. Lamont said that he had written to Sir Charles Addis expressing the views of the American Group in the Consortium in opposition to the proposal. Now, however, he had received from Sir Charles Addis a letter saying that the British Government will not permit the making of a loan which is under consideration to China unless provision be made that the proceeds shall be spent in Great Britain (British Empire?). Mr. Lamont said that he and his associates feel that the rescinding of the resolution under reference would put an end to any and all hope that the Consortium may ever function for the purpose for which it was intended; that the Chinese had never become reconciled to the idea of the Consortium; and that the rescinding of this proviso would make the idea conclusively unacceptable to them. It seemed to him that it would be preferable to suggest to the British Group that the member [Page 503] Groups vote to make an exception in the case of a proposed loan such as the British have in contemplation. I said that I concurred in the view which Mr. Lamont had expressed that a rescinding of the resolution would be fatal to the idea of the Consortium: it would take the foundation right out from under the whole Agreement; it seemed to me that his suggestion of an alternative was sound; I still hoped that the Consortium idea might some day prove useful and I would deprecate seeing the Consortium dissolved. Mr. Lamont said that neither the American Group nor any of its members is in position now to make any loans to China and that they are simply holding together the framework. I said that this was true, but that the time might come when the whole situation would be such as to make a resort to the Consortium machinery seem desirable on the part of most or all of the parties especially concerned. Mr. Lamont intimated that he would submit his proposed alternative to Sir Charles Addis (or the British Group). I suggested that it might be well to call attention, for the benefit of the British Government, to the fact that the British Government along with the other governments had given its blessing to the Consortium idea and had contributed, in influence, to the creation of the Consortium, and that it seemed not altogether appropriate that the British Government should take a position toward compelling British banks to pursue a course inconsistent with or destructive of the Consortium Agreement. Mr. Lamont said that he thought that a good suggestion and that he would incorporate in his communication to his British associates some observations to that effect.
Best wishes for the New Year were exchanged, and the conversation there ended.