893.51/7395

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

Mr. Coe informed me, on behalf of the Secretary of the Treasury, late yesterday afternoon, as follows:

Mr. Coe said that after the conference in Mr. Morgenthau’s office yesterday morning Mr. Morgenthau had gone to the President. Mr. Morgenthau [Page 441]later had stated that he had put before the President his, Mr. Morgenthau’s, plan for assisting China by advancing sums of money monthly for payment of soldiers, that the President was enthusiastic; that it had been agreed that Mr. Morgenthau should propose to T. V. Soong that United States undertake to advance money monthly for “payment” of 1,000,000 Chinese soldiers at rate of $5 U. S. currency per month and, further, money for “maintenance” of another million Chinese soldiers at the same rate, $5 U. S. currency per month; that Mr. Morgenthau had put this up to T. V. Soong; and that T. V. Soong was telegraphing to his Government.

I asked Mr. Coe whether Mr. Morgenthau or the President had consulted the Secretary of State with regard to this. Mr. Coe indicated that he thought that they had not. I asked whether, in as much as it seemed to be agreed in all quarters that this matter was of importance first of all from political angles, it would not seem to him that the Secretary of State should be consulted and should participate fully in reaching a decision. Mr. Coe said that the matter seemed to have been decided and that Mr. Morgenthau was going to leave town tomorrow (this morning) to be away for about a week: he was to leave this loan matter in the hands of Mr. Bell. Mr. Coe suggested that if I wished to make any suggestions to Mr. Morgenthau I telephone him at his home.

The above reported conversation having been concluded, I immediately informed the Secretary of State and I a few minutes later informed Mr. Livesey and still later Mr. Berle of what had been said. Later in the evening, I discussed the matter with Mr. Jacob Viner, of the Treasury. In the light of what was said in those conversations, I decided to take no further action last evening. I have this morning discussed the matter further with Mr. Livesey.

S[tanley] K. H[ornbeck]