893.51/7119
Memorandum of Conversations, by the Adviser on Political Relations (Hornbeck)48
Under instruction from the Secretary I called on the Secretary of the Treasury, by appointment, this afternoon. In receiving me, Mr. Morgenthau had present Mr. Cochran49 of the Treasury Department. I stated that I had come to inquire, on behalf of the Secretary, whether and to what extent the Treasury Department had given thought to and made study of the question of possible use of the Stabilization Fund in connection with the situation in China. I said that we were neither recommending nor asking for any course of action but that my mission was purely exploratory. I made mention of the fact that Dr. Arthur Young, when here last fall, had talked to us to the effect that in Ills estimate China’s currency might need support in the spring of 1940; I said that one at least of our officers feels strongly that such will probably be the case; and I said that I believed that Dr. Young had talked with Mr. Morgenthau.
[Page 646]Mr. Morgenthau said that Dr. Young had talked with him some months ago and that at that time he had not felt that he, Mr. Morgenthau, was in a position to give the matter serious consideration. He said that he would like to have me talk with Mr. White50 (Director of Monetary Research). He thereupon arranged for me to see Mr. White. His last word, as I left his office, was to this effect: anything in the direction of assistance to China will have our sympathetic consideration.
I talked for about half an hour with Mr. White. I explained to Mr. White as I had done to Mr. Morgenthau that the Secretary of State was not making any recommendation or request; that my mission was, on behalf of the Secretary of State, exploratory. Mr. White talked at some length about difficulties in the way of making a “loan” to China for currency stabilization purposes. I then explained that we here are not thinking in terms of the possibility of a loan but rather in these terms: Would use of the Stabilization Fund be feasible from the domestic point of view and if so might it be practicable from point of view of economic (financial) and political effect in relation to the situation in the Far East, especially in China. I gathered from the whole of what Mr. White said that the Treasury has not studied the subject extensively. Mr. White indicated that they had not felt like giving time and effort to a study of the question unless and until there came to them from this Department a suggestion that they do so. I said that I felt warranted in saying that the Secretary of State would not be likely to wish to commit himself in any way with regard to the matter until there had been given to him some indications, tentative and preliminary though they might be, that, from point of view of practicability, the subject would warrant consideration. Mr. White said that he would take the matter up with Mr. Morgenthau and would keep me informed of any developments. I gave Mr. White, for his confidential consideration, a copy of the memorandum which was prepared by Dr. Young under date December 22, 1939.51 I stated that in giving him this, in confidence, I made myself no guarantor of or sponsor for the contents of the memorandum, but that I felt that it contained useful data.
At one point in the conversation, Mr. White spoke of the possibility of allocating some specified sum for use in relation to support of Chinese currency. I inquired whether it would be necessary to set aside a specified sum and whether there need be any publicity: was it not a fact that in the run-of-the-mill use of stabilization funds avoidance [Page 647] of publicity is the practice and tends to increase effectiveness. Mr. White said that in practice much can be done without publicity.
In leaving, I reiterated that my approach had been purely of an exploratory character. Mr. White said that he understood.