893.51/7434
The Secretary of the Treasury (Morgenthau) to the Acting Secretary of State
My Dear Mr. Welles: I have your letter of March 9, 1942, in which you question the desirability of eliminating Article II from the draft of the Agreement presented to Dr. T. V. Soong.
[Page 483]I would welcome any provisions in the financial arrangement with China which would protect the financial interests of the United States, as well as promote the most effective economic use of the funds by the Chinese. If there were not overbalancing political and military considerations, I would insist upon the retention of Article II of the original draft, and even inclusion of stronger provisions. But it has always been agreed at meetings between State and Treasury Departments that the purposes of the financial aid were predominantly political, diplomatic, and military. These considerations therefore have determined the formulation of the terms of the Agreement which was submitted to the Chinese.
As you know, the first draft handed to the Chinese Government included Article II calling for consultation and exchange of information. However, in view of Generalissimo Chiang Kai-shek’s reactions to Article II, and of his request that it be omitted, communicated to us in the letter from Dr. T. V. Soong to this Department, the Treasury was unwilling to risk jeopardizing the important political and military value of this financial aid by insisting upon the retention of Article II in the Agreement and therefore raised that question with the State Department.
In light of the fact that the determination of the inclusion or the exclusion of Article II turns almost wholly on questions of political character, and in view of our telephone conversation of today, I should like to have you advise me as to what our next step should be in replying to the Generalissimo.
Since I feel that time is of the essence and that we should consummate this Agreement without delay, I would appreciate an answer from you on this matter as soon as possible.
Sincerely yours,