893.51/6446
Memorandum by the Assistant Chief of the Office of Arms and Munitions Control (Yost)
The attached article from the New York Times of July 2086 suggests that the Treasury Department is concerned over the possible application of the neutrality law87 to China and the effect such application would have on recent arrangements for the extension of credits to the Chinese Government by the Export-Import Bank. At a press conference, Mr. Morgenthau declared that, should the law be applied to China, an opinion on this point would be requested from the Attorney General.
Actually, the primary question which would arise in these circumstances would not appear to be the interpretation of the Neutrality Act. International custom and practice have long forbidden the extension of loans, the granting of credits, or the rendering of similar forms of assistance by neutral governments to belligerent governments. This fact alone would seem to make it obligatory upon the United States Government to suspend for the duration of the hostilities any credit operations, which had not been completed prior to the outbreak of the hostilities, with a foreign government involved in war.
Since this is the case, the question of whether or not Section 3 of the Neutrality Act applies to loans and credits extended to belligerents by the United States Government or its agencies would seem to be largely academic. It would appear to be reasonable to assume, however, that Congress, in prohibiting the granting of loans and credits to belligerents by individual Americans, expressed a general disapproval [Page 614] of such grants which would probably extend equally to those made by the United States Government.