Memorandum of Telephone Conversation, by Mr. Robert N. Magill of the Division of Chinese Affairs

Mr. Doherty34 of FN called by telephone today to say that the Federal Reserve Board had inquired on behalf of the New York Federal Reserve Bank as to whether the Department had any objection to that Bank’s compliance with a request from the Central Bank of China for a three months’ extension of its ten million dollar gold-secured loan. This loan has been in effect for three months, bears interest at 1½percent, and is secured by gold holdings of the Central Bank on deposit with the New York Federal Reserve. My impression is that the loan is being used primarily to finance cotton imports.

Mr. Doherty and I agreed that China’s use of its own financial resources, while of direct interest to the United States, should not, in general, be subject to United States approval. In this particular case the transaction has a quasi-private character and we could think of no overriding reason for taking exception to the proposed extension of the loan. I decided to speak for CA35 on this matter since an answer was desired immediately and since I was confident that there would be no political grounds for objection.

  1. Edward W. Doherty, Assistant Chief of the Division of Financial Affairs.
  2. Division of Chinese Affairs.