Memorandum of Conversation, by the Chief of the Financial Division (Livesey)14

Proposed Loan to China

Mr. Lauchlin Currie, Mr. Berle and Mr. Livesey called by appointment on Mr. Harry White of the Treasury Department and conferred with him, Mr. Bernard Bernstein,15 Mr. Friedman,16 Mr. Coe,17 and Mr. Southard18 regarding General Chiang Kai-shek’s request for financial assistance.

Mr. White asked for an expression on the political factors. Mr. Berle said that everybody concerned with the matter in the State Department felt that it was very important to strengthen Chinese morale by giving large financial assistance at the present time. Mr. Currie expressed concurrence with this view.

Mr. White said that it was evident that a small loan would not have significantly useful economic and political effects. On the other hand the Chinese currency is at a stage where depreciation may rapidly accelerate during the next year with crippling effects on China’s ability to finance its military efforts. A loan large enough to check the inflation might have very helpful effects.

It was agreed that there is no need to await British action on the similar proposal made to them by Chiang. The British relation to the matter could be determined later.

During the discussion Mr. White said that an operation of the contemplated kind could properly be described as a stabilization operation but Mr. Morgenthau might not wish to devote so large a part of the Stabilization Fund to China without obtaining Congressional authorization. It was suggested also that thought should be given to amending the Lend-Lease Act19 to include financial aid of this kind when Congress next considers it in a month or so.

Mr. White requested as a basis for Treasury action a letter from the Secretary of State, or possibly from the President, informing the [Page 425]Secretary of the Treasury that financial assistance by the United States Government up to some indicated figure at the present time is believed to be necessary for political and military reasons. With a letter of this kind, the Treasury could proceed to study the numerous practical and technical questions which the arrangements will involve. In the meantime the Treasury will tell Mr. T. V. Soong, the Chinese Minister of Foreign Affairs, who has been inquiring about the matter, that it is receiving intensive consideration.20

  1. Mr. Livesey’s memorandum became the basis for affirmative action for an American loan to China within the Department of State by the Division of Far Eastern Affairs and the Foreign Funds Division. In a memorandum of January 9 the Division of Far Eastern Affairs fully concurred “in the desirability of making a large loan to China at the earliest possible moment” (893.51/7386). See supporting memorandum of January 10 by Mr. Hornbeck to the Secretary of State and Secretary Hull’s letter to the Secretary of the Treasury, January 10, pp. 433 and 434.
  2. Assistant General Counsel, Treasury Department.
  3. Irving S. Friedman, Division of Monetary Research, Treasury Department.
  4. V. Frank Coe, Assistant Director of the same Division.
  5. Frank A. Southard, Assistant Director of the same Division.
  6. Approved March 11, 1941; 55 Stat. 31.
  7. Notation by Mr. Livesey: “Treasury will call Fox and Adler [Solomon Adler, Treasury agent in China] in from Chungking to assist in negotiating the new credit.”