893.51 Manchuria/100
Memorandum of Conversation, by the Chief of the Division of Far Eastern Affairs (Hamilton)
Mr. Henry Breck of J. & W. Seligman and Company, New York, called by appointment made by long-distance telephone from New York. He said that a short time ago his firm had been approached by a German bearing a letter from Mr. Aikawa with a proposition that J. & W. Seligman and Company undertake the placing of a credit in this country to the Manchurian Industrial Development Corporation covering the purchase of steel rails, steel, and copper. Mr. Breck said that he had gained the impression that these commodities were to be used in rehabilitating certain sections of the South Manchuria Railway. He said also that the commodities mentioned were not arms and munitions of war. He said that the proposition as advanced envisaged the putting up by the Manchurian Industrial Development Corporation of $30,000,000 in Japanese-dollar bonds plus $5,000,000 in gold, on the basis of which collateral a credit of $20,000,000 would be extended for two years, to be repaid in installments after that time.
Mr. Breck said that he doubted whether as a practical matter this credit could be placed with American financial institutions but that before continuing with consideration of the matter his firm wished to know the attitude of the Department of State in the premises.
I said that I had been very much interested in his statement expressing doubt whether American financial institutions would be likely to agree to extending any such credit and that in view of Japan’s general credit position I personally would have been surprised to hear that American financial institutions would be interested in extending any such credit. I referred to the fact that some months ago the Department of Commerce had issued a circular advising Americans to do business with Japan only on the basis of irrevocable letters of credit. I said that exchange control in Japan and the difficulty of getting funds out of Japan were responsible for the issuance by the Department of Commerce of the circular in question. I said that much the same situation in reference to exchange control existed in Manchuria. I said that in the light of the fact that Japan’s military activities were resulting in serious injury to American rights and interests—which fact I was sure Mr. Breck was apprised of from the communications exchanged between this Government and the Government of Japan since last October—, it had been our hope that American financial institutions would, on their own initiative and taking into account the credit risk involved, not take any action which would facilitate, either directly or indirectly, Japan’s activities. Mr. Breck then inquired whether our attitude would be the same toward the extension [Page 495] by an American seller, such as the United States Steel Corporation, of a credit along the lines under discussion. I replied that our hope that American concerns would decide voluntarily not to take action in the credit field applied not only to American financial institutions but to American sellers of commodities. He then asked what our attitude would be toward a cash sale of commodities to Japan. I told him that we would have nothing to say on that subject.
Mr. Breck said that in the light of what I had said to him, as recorded above, he was sure that his firm would have nothing to do with the proposed credit transaction. He said also that in making known its decision to the representative of the Manchurian Industrial Development Corporation, no mention would be made of the Department of State.