893.51/7470
Memorandum by the Chief of the Division of Far Eastern Affairs (Hamilton)
Subject: Financial Assistance to China
On March 19, Mr. Hornbeck, Mr. Livesey, Mr. Luthringer and myself attended a meeting in Mr. Bell’s office at the Treasury Department [Page 493] to consider further the question of financial assistance to China in the light of Dr. T. V. Soong’s letter of March 19 to Mr. Bell in which Dr. Soong stated that General Chiang Kai-shek felt that Article II of the proposed agreement, even in the modified form suggested, would be objectionable and General Chiang requested therefore that that Article be dropped completely. Representatives of the Treasury Department present at the conference were Mr. Bell, Mr. White, Mr. Bernstein, Mr. Southard, Mr. Friedman, Mr. Viner and Mr. Fox.
At the request of Mr. Bell, Mr. Hornbeck explained the view of the Department of State. (Prior to attending the conference, Mr. Hornbeck, Mr. Livesey and Mr. Hamilton had discussed the matter briefly with Mr. Welles who asked that we endeavor to seek the agreement of the Treasury Department to try to get the Chinese to agree to include the substance of Article II (relating to exchange of information and consultation as to use of the funds) in an exchange of letters.) Mr. Hornbeck said that under instruction he wished to suggest that we endeavor to obtain Chinese agreement to an exchange of letters which would incorporate the substance of Article II. Mr. Hornbeck gave reasons in support of this suggestion.
Mr. Bell said that the Secretary of the Treasury was inclined, unless the Department of State perceived objection, to agreeing to the Chinese request and concluding the agreement with the omission entirely of Article II. Various representatives of the Treasury Department expressed comment, all in favor of accepting the Chinese proposal in toto. Some of the points which the Treasury representatives brought out were that the exchange of messages between the President and Chiang Kai-shek, in which Chiang Kai-shek asked for financial aid without any conditions attached, had set the framework for any agreement; that we should treat China with full confidence; and that with every exchange of communications and the rejection by China of ideas put forward by this Government the situation became progressively worse and the position of this Government less strong. After considerably more than an hour of discussion back and forth, Mr. Hornbeck suggested that Mr. Viner and Mr. Hamilton draft a possible exchange of letters. The meeting adjourned on the understanding that Mr. Viner and Mr. Hamilton would prepare such a draft, but on the understanding also that the idea of an exchange of letters had not been accepted by those present at the meeting. Mr. Bell expressed the view that it might be well for Mr. Morgenthau and Mr. Welles to discuss the question with the President or for the question to be brought up at the Cabinet meeting the next day, March 20.
Mr. Viner and Mr. Hamilton prepared two alternative sets of a possible exchange of letters. Copies are attached.20
[Page 494]On the morning of March 20 FE prepared a redraft, based on the Viner-Hamilton drafts, of a possible exchange of letters. A copy of this redraft is attached.21 Mr. Hornbeck and Mr. Hamilton reported to Mr. Welles orally what had transpired at the meeting at the Treasury Department the previous afternoon and showed Mr. Welles the draft of a possible exchange of letters. Mr. Welles said that he would be prepared to discuss the matter at the Cabinet meeting that afternoon.
As a result of the discussion at the Cabinet meeting, the President directed Mr. Welles to speak to Dr. Soong. (See memorandum of conversation of March 21 between Mr. Welles and Dr. Soong.)