The Secretary of the Treasury (Morgenthau) to the Secretary of State

My Dear Cordell: I am in complete accord with the view of the State Department as reported to my Department by Mr. Hornbeck [Page 451] that we should go forward with consideration of the Chinese loan without waiting for Mr. Fox to arrive here with the Generalissimo’s message.67

Your letter of January 10, 1942, and the State Department memorandum of January 23, 1942,68 as well as the discussions which have been held between the officials of the two departments, inform me that the decisive considerations in the granting of financial assistance to China at this time are political and military. On this basis, I am prepared to go ahead at once, and at the conference which I have arranged with you for tomorrow, we can discuss the next steps to be taken.

I am submitting for your consideration, the following procedures for raising the funds to meet the Generalissimo’s request:

Congressional authorization to make a loan;
An appropriation of funds under Lend-Lease. I believe this would require legislation;
The Stabilization Fund;
c [d.]
The President’s War Chest (Perhaps available for part of the necessary funds.)

Each of these sources has, of course, advantages and disadvantages which you may want to consider at our meeting.

As among these possible sources of funds the Stabilization Fund in this instance seems to me to be the least desirable, because of the special character of the proposed financial aid. Should it be decided to use the Stabilization Fund for this purpose, it will be necessary to obtain the approval of the Congressional Committees in the same manner as you and I obtained it in December, 1940, in connection with the $50 million Chinese Stabilization arrangement.69

You may wish to consider the desirability of the President and ourselves meeting promptly with the Congressional leaders to advise them of the problem and to discuss the alternative methods of financial assistance. With their clearance, it would be possible for the President to make an immediate announcement that he and the Congressional leaders are prepared, subject to the necessary Congressional action, to grant China the financial assistance requested by Chiang-Kai-shek. The details could be worked out later.


Henry Morgenthau, Jr.
  1. For Generalissimo Chiang Kai-shek’s letter to the Secretary of the Treasury dated January 14, see Department of State, United States Relations With China, p. 477.
  2. Latter not found in Department files.
  3. See Foreign Relations, 1940, vol. iv, pp. 636 ff.