893.51/5937
Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck) of a Conversation With Mr. Thomas W. Lamont, of J. P. Morgan & Co.
[The first paragraph records telephone conversations arranging for Dr. Hornbeck to call on Mr. Lamont in New York.]
Mr. Hornbeck called at Mr. Lamont’s office at one o’clock and there followed luncheon and a conversation lasting two hours.
I. Mr. Lamont said that his British and French associates in the Consortium and the Japanese—perhaps most of all—had been glad to learn that the American Group was disposed to continue its membership in the Consortium. He said that the American Group had made its decision on the basis of the statement made to him, Mr. Lamont, [Page 413] in June last, by Mr. Hornbeck, in which Mr. Hornbeck had outlined the attitude of the Administration toward the Consortium, toward the American Group, and toward the question of continuance of the Consortium and of the American Group’s membership therein. He said that the continuance of the American Group’s membership was somewhat “specious” inasmuch as under the present law in this country the member banks would not be able to float portions of loans, if and when loans were made to China—for the reason that they are forbidden to issue securities. (Note: There followed some discussion of this point.)
Mr. Lamont continued to the effect that the Consortium had been created in consequence of suggestions made by the American Government (in 1918) and that the American Group had taken its place and part therein at the instance of the American Government; that, although, as had been stated by Mr. Lamont to Mr. Hornbeck in June, the continuance of that membership and the maintenance of the Consortium entail some expense without any tangible return, he and some other of the responsible personnel have felt that, if the present Administration prefers that there be made no change (for the present at least) and thinks that continuance in existence of the Consortium may serve a useful purpose and that perhaps some day the Consortium may do something constructive, the thing for them to do is to “continue”. They therefore have not raised with other and less interested parties the question of possible discontinuance; and they have said to interested persons who have inquired that the present would not be an opportune time to make a change, that a change might be misunderstood in the Far East—especially in Japan, that this would perhaps create new difficulties (if only those of explaining) for the American Government, and that therefore no change should be made.
Mr. Hornbeck said that he was very glad to hear that the matter had thus unfolded, that he personally found this attitude and these developments gratifying, and that he thought that knowledge of them would be gratifying to the Secretary of State and the President.
II. Mr. Lamont then proceeded to give an account of the activities of Mr. Jean Monnet. He said that Monnet had been in 1919 “first choice” for the position of secretary general of the League of Nations, but that Monnet had declined—after which Sir Eric Drummond had been chosen and appointed. Monnet had, however, developed and maintained an active and serious interest in the League. Monnet had become a friend of Rajchman. Rajchman had been chosen by the League for work in China. In 1931, when the Japanese operations in Manchuria began, Rajchman—knowing China and not knowing Japan—had become an active partisan and participant in political developments. In particular, T. V. Soong and Baron Shidehara had [Page 414] exchanged certain messages and were arranging to meet in order to try to devise and propose a plan of compromise and settlement (??); and at that point Rajchman had told Soong that this was not an advisable course, with the result that the project fell through. Rajchman’s attitude and activities had made him distinctly persona non grata to the Japanese. Later Soong had come to this country and had succeeded in concluding the $50,000,000 cotton and wheat credit per the R. F. C. Then Soong had gone to Europe. Soong’s effort had been “to build himself up” for a contest for power with Chiang Kai-shek. In Europe he had not accomplished much. He had proposed the formation of his “advisory council”. Both Mr. Lamont and Sir Charles Addis had told him that he should not plan to exclude the Japanese. Mr. Lamont had declined to serve—as had also Sir Charles. (Note: See memorandum of conversation between T. V. Soong and Mr. Hornbeck of August 8, 1933.89) Then Soong had come back to this country, had seen the President at Hyde Park, had explained his project to the President, and had been given by the President the names of various Americans whom Soong might ask to have on his council. Among these was the president (?) of the New York, New Haven and Hartford Railway, who had in turn consulted Mr. Lamont as to whether he should accept the invitation which Soong subsequently had extended to him. But when Soong got back to China, Chiang Kai-shek had put him out of office and vetoed his project for an “advisory council”.
Meanwhile, Mr. Lamont said, Soong had invited Jean Monnet and Sir Arthur Salter to come to China. They had gone. Salter produced a report on the economic situation in China. Monnet had developed the project and taken the initiative which brought into being the China Development Finance Corporation. The Japanese had been very suspicious of Monnet and had opposed his efforts and project. This, in part at least, had brought on the Japanese statement of policy (the Amau statement) in April last.90 Among the Chinese, various of the bankers, among whom was Li Ming and the Bank of China, had been opposed to the China Development Finance Corporation project. But ultimately they had subscribed to it. Next, Monnet had set himself—and Mr. Lamont had suggested to him that he do so—to getting acquainted with the Japanese and allaying their suspicions and misunderstanding of him and the China Development Finance Corporation project. Monnet was now in New York and was expecting soon to come to Washington and would call on Mr. Hornbeck.
[Page 415]Mr. Lamont next said that he conceived that the China Development Finance Corporation might develop or be developed into a link between China and the Consortium. Mr. Hornbeck remarked that the same thought had been running for some time, in the form of a query, in his mind: might not such a link develop. Mr. Lamont recalled the fact that he had always advocated the formation by the Chinese of a banking group which might have membership in or a definite and cooperative association with the Consortium; but antipathy to the Consortium idea had developed in the early days of the Consortium’s existence to such an extent that nothing had ever been developed on that line. Now, however, the China Development Finance Corporation might meet that need. Mr. Hornbeck remarked that the fact that the Bank of China and other Chinese banks had finally given the China Development Finance Corporation their support might be regarded as an encouraging development in that connection.
III. Mr. Lamont adverted to a suggestion which he had made in the course of a conversation in June with Mr. Hornbeck; a suggestion in the form of a query whether a declaration of policy with regard to the Far East by the four powers most concerned might not” be a helpful political move. (Note: See memorandum of June 18, 1934.) He said that he had given quite a little thought to this while on shipboard and had produced a memorandum; but that upon studying his own memorandum he had come to the conclusion that the idea probably was not practicable: he realized, among other things and for instance, that other powers, especially Great Britain, were, by virtue of their interests, concerned and would need to be included. But he would give Mr. Hornbeck, for what it might be worth, a copy of the memorandum. Mr. Hornbeck expressed interest, and both he and Mr. Lamont read the memorandum and exchanged comments upon its contents. Mr. Hornbeck said that he greatly appreciated Mr. Lamont’s having worked out the statement and suggestion contained in the memorandum; that he would study it with care; that he must say at the moment in all frankness that he doubted whether the suggestion as it stood was one of which any practical use could be made; but that it contained suggestive materials and perhaps out of it there might be developed something for which at some time there might be found use. Mr. Lamont said that he was not putting it forward as a serious recommendation or as anything which he would urge, but that it was a follow-up on what he had orally offered in the form of a query in the earlier conversation referred to.
IV. Mr. Hornbeck said that he wished to refer to inquiries which Mr. Lamont had made in letters a few months ago with regard to the wheat and cotton credit to China. He said it was “our feeling” that [Page 416] that transaction was not inconsistent with obligations of the U. S. Government relating to the Consortium agreement. Mr. Lamont said that he concurred. Mr. Hornbeck referred to the conversation which the Secretary of State had held with Mr. Lamont, and Mr. Lamont said that he had suggested to the Secretary that we ought to consult with or notify the Consortium members before concluding the transaction—but that the Reconstruction Finance Corporation had pushed ahead with it. He realized that the Department of State had had little or no part in the transaction.
V. Mr. Hornbeck then mentioned correspondence with regard to the Hukuang loan and the filing in Peiping of protests against certain of China’s lapses in connection therewith.91 He said that on several occasions the British had proposed joint or simultaneous representations to the Chinese Government, and, in doing so, the British Legation in Peiping has offered drafts in the texts of which they make statements with regard to China’s obligations under the Hukuang loan agreement to which statements the Department has found it impossible to subscribe. It was for that reason that Mr. Hornbeck had suggested to Mr. Lamont, in one letter, that the American Group’s legal advisers scrutinize carefully that provision of the loan agreement which relates to substitution of securities. We had believed it expedient to rely upon general reference to that article of the loan agreement, without attempting to paraphrase it or attempting to declare in our own language just what the Chinese Government’s obligation is. Mr. Lamont said that he “saw the point”. He then said that the British are coming along with something new on this subject, something that differs apparently from the views of the legal advisers of the American Group,—and that something in that connection probably will be sent soon to the Department. (Note: It was not indicated whether this would come from the British Government or from Mr. Lamont.92)
VI. In the concluding exchanges, Mr. Lamont requested that Mr. Hornbeck convey his greetings and an expression of his regard to the Secretary of State. Mr. Hornbeck said that he was very happy to be given that commission, as the Secretary of State had expressly asked him yesterday to convey his, the Secretary’s, regards to Mr. Lamont; which he, Hornbeck, had up to this moment inadvertently failed to do. Mr. Lamont said that he appreciated the Secretary’s thoughtfulness. Mr. Hornbeck said that he was sure the Secretary would appreciate Mr. Lamont’s message. Mr. Lamont thanked Mr. Hornbeck for having made this conversation possible. Mr. Hornbeck thanked [Page 417] Mr. Lamont for having suggested it, for the time which he had given to it, and for the luncheon which he had been so good as to provide. And the conversation there ended.