893.51/6681
Memorandum of Conversation, by the Adviser on International Economic Affairs (Feis)
| Participants: | Mr. Ralph M. Carson of Davis, Polk, Wardwell Gardiner and Reed, 15 Broad Street, New York. |
| Mr. Feis. | |
| Mr. Hamilton—for part of conversation. |
Mr. Carson called upon me this afternoon. He explained that coordinated approaches were made to the Guaranty Trust Company by the Chinese Ambassador, the Chinese Consul General in New York, and Mr. Hsu in regard to a bank loan of $10,000,000 for three years, secured by a cash deposit of the same amount to be made to the Guaranty Trust Company by the Chinese Government. Mr. Carson stated that since there could be no apparent benefit of a financial character to the Chinese in this transaction, the Guaranty Company was naturally puzzled and would appreciate having any sidelights which the Department may be able to throw on the matter.
I stated that as far as official statement went, the Department had “no comment to make”. Mr. Carson asked whether any difficulty would arise under the Johnson Act.31 I replied that the Department of Justice and not the State Department was the branch of the Government responsible for the interpretation and application of this Act. However, as far as I was acquainted with the Attorney General’s rulings on the subject, China did not fall within the scope of the application of the Act.
He said that in the discussion among themselves as to the reasons why the Chinese Government might wish to enter into this transaction, various possibilities presented themselves; among others were the following: (a) the Chinese Government thought that through this transaction they might be laying the basis for later and other loan transactions; (b) the Chinese thought the mere announcement of a loan arrangement would have an encouraging moral effect in China and possibly influence decisions in other monetary centers. I commented that these might be possibilities, and suggested also the transaction might arise from the apparent somewhat competitive [Page 556] eagerness of the various Chinese diplomatic representatives abroad to secure help for China.
In reply to Mr. Carson’s question as to whether previous transactions of this character had come to the attention of the Department, I stated that several had, though differing somewhat in detail; that they had however all dissolved at some point.
The discussion also touched upon the question of whether the Chinese Ambassador would have the authority to make the actual deposit of funds, and Mr. Carson said he believed that special credentials would be required.
Mr. Carson indicated that he did not think the Guaranty Trust Company would close the transaction because of its difficulty of understanding what purpose may lay behind it.
In the course of this conversation, Mr. Hamilton joined us and I summarized the substance of the preceding to him, and he agreed.
- Approved April 13, 1934; 48 Stat 574.↩