Memorandum of Conversation, by the Adviser on Political Relations (Hornbeck)

At Mr. Lamont’s15 request, I had a conversation with Mr. Lamont last evening at the Union Station, Washington, D. C. One of the subjects which Mr. Lamont wished to discuss was that of the future of the China Consortium.

Mr. Lamont began with a reference to various conversations which have been held between him and me in past years on the subject of the China Consortium. He referred especially to a question which has been raised by member banks of the American Group, during recent years, whether any useful purpose is being served by keeping the Consortium alive and particularly whether the American Group should continue its membership. He said that the latter of these questions has been raised again, rather insistently, by some of the members. He said that sometime ago the Chase Bank had withdrawn and that within the last few days Kuhn, Loeb and Company had given notice of withdrawal. He said that there was a certain amount of what seemed to be useless expenditure involved; that J. P. Morgan and Company no longer had a direct interest in the question of possible future business for the Consortium; and that J. P. Morgan and Company did not feel like trying to “carry the ball” all by itself. He mentioned the conversation which he had had a few days ago with Mr. Welles16 and inquired whether Mr. Welles had informed me thereof.

I replied that Mr. Welles had informed me and Mr. Hamilton17 of the conversation under reference, and that we had discussed the matter briefly.

Mr. Lamont asked whether I could tell him how we felt about the matter and/or what might be my own opinion.

I replied that we were inclined—I in particular—to view the matter in a light somewhat similar to that in which we had viewed over a considerable period of time the question and problem of withdrawing or reducing in number the American armed forces stationed in north China. Referring to the expression of a benevolent attitude toward the Consortium, in principle, of the present Administration, [Page 722] of which I had informed Mr. Lamont in 1933 or 1934,18 I said that we realized that the unfolding of events in the Far East had made ever more remote the likelihood of there developing a situation in which practical use might be made of the Consortium in service of general interests; that we certainly would not feel warranted in strongly urging that the Consortium be kept alive; but that we felt that the opportune moment for an announcement of its dissolution or of American withdrawal from it was not at hand, in fact that the present moment would be somewhat inopportune.

Mr. Lamont then asked why we would regard the present moment as inopportune. He remarked that the Chinese had always been opposed to the Consortium. I replied that there were a number of things to which the Chinese had over a long period been opposed but the existence of which at the present time is at the present time gratifying to them, and to which they now cling. I said that dissolution of the Consortium or American withdrawal from it at this time would probably be viewed with regret by the Chinese and with gratification by the Japanese. Mr. Lamont said that he could not help doubting this, at least as regards the Japanese: the Japanese, he said, have been most insistent on keeping the Consortium alive and have entertained hopes that it might be of assistance in connection with their plans for financing in relation to China. He personally would not wish to hurt the Chinese and would not wish to help the Japanese at this time; he had told the Japanese repeatedly and emphatically that American finance would do nothing to help them; but he was sure that the Japanese would regret rather than be pleased over dissolution of the Consortium. I then said that it might be that we were mistaken in our estimate of what would be the effects on the Chinese and the Japanese respectively; that I had informed him of our first reaction; that I would report the view which he had expressed; and that we would give the matter further consideration.

Mr. Lamont asked when Ambassador Johnson19 would be present, and I informed him that Johnson was expected to land in New York on January 17. Mr. Lamont said that there was, of course, no great urgency about the question which he had raised; that we doubtless would wish to talk it over with Mr. Johnson; that he, Mr. Lamont, would be back in New York in a few days; and that he would be glad to hear from me further on the subject at our convenience.

In the course of the conversation, I asked Mr. Lamont whether their membership in the Consortium was costing the members of the American Group any large amount of money. He replied: “More than we can afford to pay.” Upon my pressing mildly for possible particulars, Mr. Lamont mentioned a salary which had been paid to [Page 723] Mr. Charles R. Bennett20 over a period of years but which has now been discontinued, and a fee which is paid to the Hong Kong and Shanghai Bank. He further said that he did not know just what service the Hong Kong and Shanghai Bank rendered by way of earning the fee. I suggested somewhat jocularly that it might perhaps be a warrantable step of economy to discontinue the paying of a fee to the Hong Kong and Shanghai Bank. Mr. Lamont indicated approval of the suggestion.

At a later point in the conversation, Mr. Lamont said that there might come a point when the remaining members of the American Group would feel it absolutely necessary to give notice of termination of the Group membership in the Consortium. I inquired whether there would be any need for making any public announcement; whether such action might not take place more or less by a process of default and without any special (at least without public) notification. I referred to the fact that a year or so ago the British Group had indicated, through the British Government, that it had in mind the giving of a notification, but that apparently nothing further had happened. Mr. Lamont made no express reply to this inquiry and observation except to say that plans which British financiers had had in mind at that time have not worked out.

We parted with the understanding that further consideration would be given here to the matter and further communication would be had by us with Mr. Lamont on the subject.

S[tanley] K. H[ornbeck]
  1. Thomas W. Lamont, of J. P. Morgan and Company, Representative of the American Group of the China Consortium.
  2. Sumner Welles, Under Secretary of State.
  3. Maxwell M. HamUton, Chief of the Division of Far Eastern Affairs.
  4. See memorandum of June 18, 1934, Foreign Relations, 1934, vol. iii, p. 393.
  5. Nelson Trusler Johnson, Ambassador in China.
  6. Representative in China of the American Group of the China Consortium.