893.51 Con-Ob Continental/180

Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With the Vice President of the Continental Illinois National Bank and Trust Company of Chicago (Abbott)

Mr. Abbott called me on the telephone from Chicago and, after indicating that he had just returned from a vacation in Florida of several weeks’ duration, inquired whether I had seen a copy of the letter of February 15 addressed to him by Mr. Clark of the Foreign Bondholders Protective Council92 in regard to the proposed settlement of the Chicago Bank Loan. I replied in the affirmative. Mr. Abbott inquired whether I was in agreement with the view expressed in Mr. Clark’s letter under reference that the terms offered by the Chinese Government are the “utmost” that can be obtained and that acceptance thereof should therefore be recommended to the concerned noteholders. Again I replied in the affirmative. Mr. Abbott said that he had received from the Council a telegram of recent date to the effect that further progress in the matter now awaited decision by the Continental Illinois Bank and that, in the opinion of the Council, any undue delay in replying to the offer of the Chinese Government would render less likely the attainment of a satisfactory settlement. Mr. Abbott inquired whether I concurred in such opinion. I replied by saying that for some time past I had felt that the offer of the Chinese Government should be accepted promptly, as a quibbling over details with attendant delay might cause the Chinese Government to drop the matter entirely.

Mr. Abbott then referred to the offer of the Chinese Government to provide as security for the payment of the loan either the Consolidated Taxes or the Salt Revenue and inquired which of the two would be preferable. I said that in my opinion the two revenues were, for the purpose indicated, of equal value; that there were those who might argue in favor of the Salt Revenue on the basis of the fact that its administration is in part foreign directed; that however that might be the success or failure of any settlement which might be reached would, in my opinion, depend not on the particular security [Page 666] offered but rather on the ability and the preparedness of the Chinese Government to live up to its agreement.

Mr. Abbott inquired whether, in the event that the Continental Illinois Bank should concur in the view of the Council, the Department would associate itself with the settlement under consideration. I replied to the effect that the entire matter was private in character and that the American Government would not become a party thereto. I added, however, that the Department would, as in the past, be prepared to endeavor to protect and to assist the concerned American interests in such manner as, in the light of the then existing circumstances, might be deemed appropriate and practicable.

In concluding my remarks I said that the views I had expressed were of course personal. Mr. Abbott said that he realized that such was the case; that our frank discussion of the subject was helpful to him; and that he would communicate promptly—probably today—with the Foreign Bondholders Protective Council.

S[tanley] K. H[ornbeck]
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